The numbers: Sales of newly built homes in the U.S. fell in August as interest rates and home prices stayed elevated, dampening buyer demand.
U.S. new-home sales fell 8.7% to an annual rate of 675,000 in August, from a revised 739,000 in the prior month, the Commerce Department reported Tuesday.
The number is seasonally adjusted and refers to how many homes would be built over an entire year if builders continued at the same pace every month.
The jump fell short of expectations on Wall Street. Economists had forecast new-home sales to total 695,000 in August.
The rate of new-home sales was dragged down by a sharp drop in the Midwest.
The data from July was revised significantly. New-home sales rose to a revised 739,000 in July, compared with the initial estimate of a 4.4% increase.
The data on new-home sales are volatile month to month and are often revised.
Key details: The median sales price of a new home sold in August fell to $430,300 from $436,700 the month prior.
The supply of new homes for sale rose 11.4% between July and August, equating to an 7.8-month supply.
Regionally, the Northeast led the nation in new home sales, posting an increase of 6.7%. New home sales fell across the rest of the U.S., with the sharpest drop recorded in the Midwest at 17.2.
Overall, sales of new homes are up 5.8% compared to last year.
Big picture: Over the last few months, home builders have been the biggest beneficiaries of a lack of resale inventory, but as mortgage rates stay high and credit conditions tighten, even they have begun to feel uncertain about their future. In confidence surveys, builders have indicated their nervousness over the strength of buyer demand. Confidence fell to a five-month low in September. The 30-year mortgage was at 7.51% as of Monday afternoon, and inching higher, according to Mortgage News Daily.
What are they saying? “New home sales are probably starting to react to the recent further increase in mortgage rates which will probably help push new home sales price[s] lower in the coming months,” Giampiero Fuentes, an economist at Raymond James, wrote in a note. He also noted that the inventory of homes is also ticking up.
Market reaction: Stocks
DJIA
SPX
were down in early trading on Tuesday. The yield on the 10-year Treasury note
BX:TMUBMUSD10Y
was above 4.5%.
Shares of home builders, including D.R. Horton, Inc.
DHI,
Lennar Corp.
LEN,
PulteGroup Inc.
PHM,
and Toll Brothers Inc.
TOL,
were down in the morning trading session.
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