Falling Mortgage Rates Help New Home Sales Rise More Than Expected In August

• There were 800,000 (SAAR) new single-family home sales nationwide in August. That's 20.5% above the revised July rate of 664,000. Sales of newly built homes are 15.4% above the August 2024 estimate, according to the U.S. Census Bureau.
• The median price of new houses sold was $413,500, up 1.9% from a year ago.
• The seasonally adjusted estimate of new homes for sale at the end of August was 490,000, a supply of 7.4 months at the current sales rate. This is lower than the 9.0 months in July and lower than the 8.2 months in August 2024.

What happened: New home sales increased more than expected in August, up 20.5% from the previous month and now running above last year’s pace. New home sales increased in every region for the first time since May 2023.

Why it matters: The combination of lower mortgage rates and the use of incentives helped builders sell more homes in August. Although the number of new homes available for sale remains above year-ago levels in most regions, it has now fallen lower in the South, the largest contributor of new homes for sale. The improvement in sales combined with a pullback in new building activity means inventory could be headed lower overall. 

In August 37% of builders cut their prices, roughly unchanged from July. However, the use of sales incentives increased to 66% in August, up from 62% in July according to the National Association of Home Builders. Despite starting fewer projects, future sales expectations hit a 6-month high.

The improvement in housing affordability is a tailwind. As for the headwinds, a slow pace of hiring and lower income growth, as well as declining population growth could constrain new home sales heading into 2026.