What happened: Newly built home sales decreased in August after an upward revision to the July estimate. In the past year, new home sales increased most in the Midwest, where housing was relatively more affordable.
Why it matters: Mortgage rates have been easing since May, but despite an even larger improvement in rates and in housing affordability in August, existing home sales and new home sales both fell last month. Still, new home sales are higher than in August 2023.
Although home buying activity tends to decline this time of year, the slowdown in new home sales could be short-lived since the latest survey data from the National Association of Home Builders showed an increase in builder confidence, coupled with a decline in the share of builders cutting their prices or offering incentives. The average price reduction also fell for the first time since July 2022.
Housing affordability has been strained for a while, causing many renter families to delay homeownership. While rents on single family homes continued to increase, the recent decline in mortgage rates caused a mortgage payment on the typical U.S. home to decline 2.9% when compared to a year ago according to Zillow data.
The typical new renter of a single family home saw their rent increase 4.5% in the past year. Not only has affordability improved, but potential buyers also have more options. For-sale inventory is higher than a year ago. The increase in for-sale inventory combined with lower mortgage rates has provided a perfect market entry-point for potential first time home buyers.