New home sales in the U.S. saw a substantial pullback in the month of August, the Commerce Department revealed in a report released on Tuesday.
The report said new home sales plummeted by 8.7 percent to an annual rate of 675,000 in August after soaring by 8.0 percent to an upwardly revised rate of 739,000 in July.
Economists had expected new home sales to decrease to an annual rate of 700,000 from the 714,000 originally reported for the previous month.
With the upward revision, the annual rate of new home sales in July was the highest since hitting 773,000 in February 2022.
The sharp pullback in new home sales partly reflected significant weakness in the Midwest, where new home sales plunged by 17.2 percent.
New home sales in the West and South also tumbled by 9.4 percent and 7.5 percent, respectively, while new home sales in the Northeast surged by 6.7 percent.
The Commerce Department also said the median sales price of new houses sold in August was $430,300, down 1.4 percent from $436,600 in July and down 2.3 percent from $440,300 a year ago.
The estimate of new houses for sale at the end of August was 436,000, representing 7.8 months of supply at the current sales rate. The months of supply is up from 7.0 in July but down from 8.7 in August 2022.
“We expect new home sales to come under pressure in the months ahead as labor markets soften and homebuying affordability worsens due to the ongoing climb in mortgage rates to a multi-decade high,” said Nancy Vanden Houten, Lead U.S. Economist at Oxford Economics.
She added, “While we expect higher rates to hurt new home sales, we think they will be more resilient than existing home sales as builders seem willing to scale up their use of incentives to motivate sales.”
Last Thursday, the National Association of Realtors released a separate report unexpectedly showing a continued decrease in U.S. existing home sales in the month of August.
NAR said existing home sales fell by 0.7 percent to an annual rate of 4.04 million in August after tumbling by 2.2 percent to an annual rate of 4.07 million in July. Economists had expected existing home sales to rise to a rate of 4.10 million.
Existing home sales declined for the fourth consecutive month and are down by 15.3 percent compared to the same month a year ago.
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