New Home Sales Plunge to Lowest Since April 2020 Lockdown Trough

Sales of new homes in the U.S. plunged 8.1 percent to a seasonally-adjusted annual rate of 590,000 in June, a far slower pace than expected by economists, Commerce Department data showed Tuesday.

The Commerce Department revised down its estimate for prior months. The May sales figure was revised down from 696,000 to 642,000, indicating the market was already much more sluggish than previously thought. That means sales grew by 6.3 percent compared with the initial estimate of a gain of 10.7 percent.

New home sales data can be volatile, especially when interest rates are changing. They frequently get revised.

Economists had expected an annual sales rate of 676,000 for June, according to Econoday.

The June figure represents a 17.4 percent decline from a year ago.

The media sales price of a new home sold was $402,400, a decline from May’s $449,000 and April’s record high $457,000. Three months of declining median sales prices may indicate that new home prices peaked this spring just as the Federal Reserve began to hike interest rates.

The supply of new homes jumped by 10.7 percent in June from the prior month. At the current sales rate, there is a 9.3 month supply of homes, which is considered a large amount of unsold homes on the market.

The Federal Reserve’s interest rate hikes have cooled down what was a blazing hot housing market. That is one of the primary channels through which the Fed’s tightening of monetary policy works. The average on a 30-year fixed-rate mortgage was 5.52 percent in June and has been around 5.45 percent in July. A year ago, the average rate was 2.87 percent.

In a separate report, the S&P CoreLogic Case-Shiller 20-city index on Tuesday showed home prices were up in May 20.5 percent compared with a year ago, a deceleration from the 21.12 percent gain reported in April. Compared with the prior month, the index was up 1.3 percent, also slower than the 1.7 percent gain reported in April.

The Federal Housing Finance Agency’s report on home prices, also released Tuesday, showed a 1.4 percent month-over-month gain and an 18.3 percent annual gain.