What happened: Newly built home sales increased in July after revisions also showed an uptick in June. 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 and new home sales rebounded along with improvements in housing affordability.
Despite a cooling labor market, the uptick in sales highlights the magnitude of the affordability challenge and just how sensitive buyers are to even the smallest declines in mortgage rates.
Although builder confidence continues to wane, persistent affordability challenges mean that many buyers are increasingly turning to new construction. This is because newly built homes are now cheaper by the square foot than existing homes in many major markets, according to Zillow data.
In July, about 31% of builders decreased prices to enhance sales, a rise from the 29% seen in June. However, the average price reduction in July stayed consistent at 6%, according to data from the National Association of Home Builders. Roughly 61% of builders are offering incentives to potential buyers. Aside from the pandemic new construction boom, the number of homes under construction is still at the highest level in 17 years. With higher inventory, incentives like rate buydowns are expected to continue to help more potential buyers make their homeownership dreams a reality.