Steel Markets

New Home Sales See Surprising Jump in August

Written by David Schollaert

September 27, 2022

New, single‐family home sales bounced back in August despite high prices and rising mortgage rates. Although those dynamics have pushed some buyers away, sales of newly constructed homes jumped 28.8% month-on-month (MoM) in August, according to a joint report from the US Department of Housing and Urban Development and the US Census Bureau.

Last month’s surprise surge comes after two consecutive months of declines in June and July. August’s sales were, however, down just 0.1% from a year ago.

Some 685,000 new homes were sold last month at a seasonally adjusted annualized rate, up from a revised 532,000 in July. A year ago, 686,000 newly constructed homes were sold.

Meanwhile, the median price for a new home dropped 6.3% MoM to $436,800 from a revised $466,300 in July. The average price also fell by 6.3% to $521,800 in August from $556,700.

The decline in median and average prices suggests that home builders are open for negotiation as the overall housing market cools.

Home builders reporting lower sale prices reached 24% in September, up from 19% in August, according to the National Association of Home Builders (NAHB). Nearly half said they offered mortgage rate buy-downs and free amenities, among other inducements, to close sales.

That’s led to deteriorating confidence in the industry, with builders’ sentiment falling for the ninth consecutive month in September to a reading of 46. A number below 50 is considered negative.

As a result, builders are pulling back on new construction. Permitting for single-family homes plummeted in August, down 10% to an annualized rate of 1.517 million units, said the US Census Bureau.

New home sales had been trending lower as prospective buyers see their budgets stretched thin by extended construction times, mounting costs, and rising mortgage rates. The average interest rate for a 30-year, fixed-rate mortgage dipped to just below 5% in August, but up from 3.22% in January.

By David Schollaert, David@SteelMarketUpdate.com

 

David Schollaert

David Schollaert is a senior analyst for Steel Market Update. David joined SMU after more than a decade in the metals and mining industry in a myriad of different roles. Much of his early experience and expertise were within the coverage and analysis of steel-making raw materials and served previously as senior editor of the CRU Prices Service. Most recently, however, before his return to market analysis, David held roles as a metals buyer and an operations manager for raw material suppliers. Based in CRU’s Pittsburgh office, David can be reached at david@steelmarketupdate.com or 724-720-1008.

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