New home sales dropped in August from the previous month as would-be homebuyers wait for mortgage rates to fall further.
Sales of new homes fell 4.7% in August to a seasonally adjusted rate of 716,000 units, down from July’s revised rate of 751,000, according to the Census Bureau on Wednesday. The reading on an annual basis rose 9.8% from last August and exceeded Bloomberg consensus expectations for sales to reach 700,000 unit pace.
Still, monthly deceleration in sales activity reflects how elevated mortgage rates, record home prices and a shortage in inventory continued plague buyer appetite for new homes.
While mortgage rates are still high, they have moved downward since May as investors anticipated the Fed’s first interest rate cut. The average 30-year fixed mortgage rate clocked in at 6.09% last week.
The Federal Reserve slashed interest rates by a half percentage point Wednesday and projected two additional cuts this year followed by four more in 2025.
Many builders have been sweetening the deals for house hunters who face affordability challenges. Lennar (LEN), for example, said during its third quarter earnings call last week that “rate buydowns and incentives have enabled demand to access the market to date.”
Applications to purchase a home rose 1% last week, according to data from the Mortgage Bankers Association (MBA) released Wednesday.
Meanwhile, builders are penciling out more projects as borrowing costs are expected to move lower, with housing starts bouncing back in August. Separate data from the Census Bureau showed that new residential construction rose 9.6% last month to a 1.36 million annualized rate, the fastest pace since April.
Dani Romero is a reporter for Yahoo Finance. Follow her on X @daniromerotv.
Click here for the latest economic news and indicators to help inform your investing decisions
Read the latest financial and business news from Yahoo Finance