New Home Sales: Plunged Further In July

Bottom Line:   New home sales plunged in July as the impact of higher mortgage rates took its toll on sales of new homes, especially lower-priced, more affordable ones. Sales were back to levels not seen since 2016, and the trend was decelerating sharply with inventories building. There was nearly eleven months' worth of sales on the market, well above the six months that is considered normal. Average prices were up nearly 20%, primarily due to the composition of sales. Demand for high-end homes has been notably less impacted by mortgage rates, whereas higher rates have made affordability of lower- and mid-priced housing an issue for potential buyers. Overall, new home sales suggest a sharp slowdown in activity to start the 3rd Quarter -- and this report offered little hope that housing activity throughout the 2nd Half will be anything but a significant headwind for GDP growth.New Home Sales FELL by 12.6% to 511k, after the prior month was revised higher to 642k. This compared with market expectations for a decline to 575k, from the unrevised June level of 590k.  Sales are now 29.6% BELOW their year-ago level.
                                        
The Inventory of Homes Available for Sale ROSE by 3.1% to 464k. Inventories are now 28.2% ABOVE their year-ago level.
               
Combined with the decline in sales, the Months' Supply increased to 10.9 months from 9.2 months. This is modestly ABOVE a normal level of 6.0 months.                                                                                         
Home Prices ROSE with median prices 8.2% ABOVE their year-ago level and with average prices 18.3% ABOVE their year-ago level.