Are Higher Interest Rates Defeating New Home Sales?
The real estate market has been one of the strongest pillars in the economic recovery, but higher interest rates are starting to weigh on new single-family home sales. On Friday, the U.S. Census Bureau reported that purchases of new homes, measured by contracts signed, plunged 13.4 percent to a seasonally adjusted 394,000-unit pace in July compared to the downwardly revised June rate of 455,000 units. Home sales were up 6.8 percent from a year earlier, but as the chart below shows, the housing market is still well below its glory days.
Prior to the disappointing report, new home sales had increased for four consecutive months. On average, economists were expecting a pace of about 490,000 units. July’s reading was the biggest miss of expectations since May 2010.
The Commerce Department also reported the median sales price on new houses sold last month was $257,200, higher than $237,400 a year earlier, but down from the record high of $271,600 made in April. The average sales price came in at $322,700 for July.