New Home Sales Increase in July, but Affordability Remains a Challenge
Sales of new single-family homes in the United States saw a significant increase of 10.6 percent in July, according to a report by the U.S. Census Bureau and the Department of Housing and Urban Development. The seasonally adjusted annual rate of new homes sold was 739,000, surpassing the estimated 700,000. However, despite this positive growth, housing affordability continues to be a concern for buyers.
The median price of new homes sold nationwide in July 2024 was $429,800, with the average price at $514,800. Carl Harris, the chair of the National Association of Home Builders (NAHB), acknowledged the challenges faced by buyers due to higher rates and emphasized the need for policies that promote the construction of more affordable housing.
The NAHB is optimistic about the future of the home-building sector, as the Federal Reserve has hinted at potential interest rate cuts in September. On a regional level, new home sales have seen increases of 22.1 percent in the Midwest, 5.4 percent in the Northeast, and 6.1 percent in the West. However, sales in the South have declined by 2.4 percent.
To entice potential buyers, the NAHB reports that 64 percent of homebuilders are offering incentives, the highest level since April 2019. Michael Shabot, an associate broker with Keller Williams New York City, has observed this trend in Manhattan, where sales of newer condos are outperforming older buildings. Developers are offering incentives such as free monthly common charges for the first year or free storage lockers to attract buyers.
Shabot believes that the current surge in sales is due to the combination of lower interest rates and the strong performance of the stock market. He predicts that this positive trend will continue into the fall.
Sindy Ready, the 2024 president-elect of the Arizona Association of Realtors, has also noticed an increase in home sales, particularly in new construction. The Phoenix/Scottsdale area, known as the “Valley of the Sun,” has experienced consistent sales growth, thanks to the influx of tech industries. Ready’s clients include a mix of local, national, and international buyers, with Californians seeking more affordable options in Arizona.
While new home sales have seen a boost, existing-home sales also saw a modest increase of 1.3 percent in July, ending a four-month decline. The National Association of Realtors (NAR) reported sales growth in three out of four major U.S. regions. Existing-home sales in the Northeast rose by 4.3 percent, while the West saw a 1.4 percent increase.
NAR chief economist Lawrence Yun acknowledged that home sales are still sluggish but noted that consumers have more choices and improved affordability due to lower interest rates. The average interest rate for a 30-year fixed mortgage is currently 6.51 percent, 5 percentage points lower than the previous week.
The median price for existing homes in July was $422,600, a 4.2 percent increase from the previous year. The median price for single-family homes was $428,500, while condos had a median price of $367,500. Yun explained that rising maintenance and insurance costs have made condos less appealing to buyers.
Inventory levels have also seen an increase, with a total housing inventory of 1.33 million units in July, up by 0.8 percent from June and 19.8 percent from July 2023. However, the supply of unsold inventory is currently at a four-month level, down from June but up from the previous year.
First-time buyers accounted for 29 percent of July’s buyers, while cash sales represented 27 percent of transactions. Individual investors or second-home buyers made up 13 percent of cash purchases.
In conclusion, while the housing market has seen positive growth in new and existing home sales, affordability remains a challenge for many buyers. Lower interest rates and incentives offered by homebuilders have contributed to the increase in sales. However, rising prices and maintenance costs for condos have affected their market performance. With the potential for interest rate cuts and continued demand for affordable housing, the housing market may see further improvements in the coming months.