US new home sales fell sharply in July to their lowest level since early 2016, the government reported on Tuesday, as rising lending rates cooled demand.
Americans reduced new home purchases by 12.6 percent from June to a seasonally adjusted annual rate of 511,000, continuing the downward trend, the Commerce Department reported.
The results were far weaker than the consensus among economists, who were expecting a much smaller drop.
After low borrowing costs sparked a home buying boom during the pandemic, the pace of sales has fallen 29.6 percent from July 2021, the data showed.
“The July drop continues the steep downward trend in sales since the start of the year,” said Ian Shepherdson of Pantheon Macroeconomics, noting that “new home sales have fallen below pre-pandemic levels.”
Sales fell by double digits across the country last month except in the Northeast.
Mortgage rates have risen sharply in recent months as the Federal Reserve hikes interest rates to fight rising inflation.
Central bankers are hoping the aggressive moves will cool overheated demand across the economy, including in the housing market, where builders are struggling to keep up amid supply constraints and a labor shortage.
These factors have contributed to a steady rise in home prices, with the median cost of a new home rising to $439,400 from $414,900 in June.
However, sales data can be volatile.
“This data is wild month-to-month,” Shepherdson said.
“It’s reasonable to assume that the sharpest sales declines are behind us, although they’re likely to fall a bit further.”
#home #sales #fall #sixyear
