July 2024 Sees Surge in New Home Sales Amid Market Recovery
July 2024 brought an unexpected boost to the new home market, with the U.S. Census Bureau reporting a seasonally adjusted annual rate of 739,000 new homes sold. This was the highest figure seen in fourteen months, significantly surpassing forecasts of 624,000 units. Although sales declined by 10.6% compared to a revised June figure, they were still 5.6% higher than the previous year. This spike follows a pattern of steady recovery since the start of 2023, after a two-year period of retraction following the pandemic-driven peak in late 2020.
Historically, new home sales have seen notable fluctuations, often mirroring broader economic trends. For instance, after the 1990 recession, sales accelerated, peaking during the housing bubble of 2005. A similar trend was observed starting in 2011, with steady growth until the 2020 peak. However, when population growth is factored in, today’s new home sales are 30.2% below the level seen in 1963, despite being 25.0% higher in absolute terms. As of July 2024, the 30-year mortgage rate stood at 6.46%, which continues to challenge affordability for many prospective buyers.
The median price of a new home in July was $429,800, marking a 3.1% increase from the previous month. However, prices were 1.4% lower than in July 2023. When adjusted for inflation, the month-over-month increase stood at 3.0%, while the year-over-year drop extended to 4.2%. This underscores the persistent volatility in home pricing, as demand fluctuates in response to economic conditions and mortgage rate trends.
Despite the positive sales numbers, experts urge caution. The National Association of Home Builders (NAHB) pointed out discrepancies between the Census Bureau’s optimistic sales figures and the NAHB/Wells Fargo Housing Market Index, which showed weakness in builder sentiment. The NAHB also highlighted that while mortgage rates dipped slightly in July, ongoing affordability issues and higher construction costs remain obstacles. There is optimism, however, that easing monetary policies and falling interest rates could drive further improvements in the homebuilding sector.
New home inventory in July decreased by 1.1% from the previous month, with 462,000 units available, translating to a 7.5-month supply at the current sales pace. This inventory level is above the typical balance point of six months but still reflects tight availability when considering both new and existing homes. Regionally, the Midwest experienced the largest year-to-date sales growth at 22.1%, followed by the West at 6.1% and the Northeast at 5.4%, while the South saw a 2.4% decline.
In summary, July 2024 marked a key turning point for new home sales, offering hope for continued recovery in the housing market despite persistent affordability challenges and volatility in builder sentiment.
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