• New home sales rose 0.6% in July to an annualized rate of 652,000, surpassing the consensus estimate of 632,000.
  • June's figure was revised sharply upward to 656,000 from the previously reported 627,000.
  • The supply of new homes increased to 9.2 months, the highest level since May 2020, signaling a more balanced market.

New home sales in the US unexpectedly ticked higher in July, defying forecasts for a pullback and suggesting underlying resilience in the new construction market. The 0.6% increase to a 652,000 annual pace was accompanied by a substantial upward revision for June, painting a picture of a stronger-than-anticipated summer for builders.

The data indicates that builder incentives, including mortgage rate buydowns and assistance with closing costs, are effectively countering affordability headwinds from elevated interest rates. “Builders are getting creative to move inventory, and it’s working for now,” said an analyst who asked not to be named discussing the data. “The question is how long they can sustain these incentives if costs remain high.”

A key takeaway from the report is the continued accumulation of inventory. The months’ supply jumped to 9.2, marking the highest reading in over five years. This rising supply, while offering more choices for buyers, also points to slower turnover and potential pressure on price growth in the coming months. Median sales prices have remained nearly flat on a year-over-year basis, a sign that the market is stabilizing after years of rapid appreciation.

The sales gains were not uniform across the country, with the South and Midwest regions leading the way while other areas showed more mixed results. The performance aligns with broader housing trends; existing-home sales also rose in July, attributed to modest improvements in affordability as wage growth now outpaces home price growth. Homes are also taking longer to sell, with the median time on market climbing to 58 days, giving buyers more negotiating power.

Efforts to reach several major national homebuilders for comment on their sales strategies were not immediately successful. The overall trend suggests the market is gradually shifting from the extreme seller’s favor seen during the pandemic towards a more balanced environment. While demand remains above post-pandemic lows, experts anticipate home values and sales will remain under pressure for the remainder of the year, with inventory likely to finish higher.