- Sales of new homes slowed through June to an annual pace of 590,000 units, the US Census Bureau said.
- The June number was the lowest since April 2020.
- Fewer Americans are buying homes and rising mortgage rates are making it even more expensive.
Housing costs continue to rise – and that’s pushing fewer Americans to buy homes.
New home sales in the United States fell in June to their lowest level in two years, as interest rates made housing affordability even more out of reach for many potential buyers.
During the month, sales of new single-family homes slowed to a seasonally-adjusted annual rate of 590,000 units, the US Census Bureau reported Tuesday morning. The reading reflects an 8.1% drop from the previous month’s rate.
May new home sales were revised to a pace of 642,000 from a preliminary rate of 696,000 units.
The June reading was the slowest pace of selling since April 2020 — an unprecedented time in the U.S. housing market when the coronavirus pandemic dampened activity across the country.
New home sales are now down 13.4% from 2021. The slowdown is attributed to attempts by the Federal Reserve to rein in inflation by raising interest rates. So far in 2022, the Fed has hiked rates twice, resulting in mortgage payments that cost hundreds of dollars more than just a year ago. As the Fed meets today and tomorrow, it’s likely that another rate hike is imminent – and that could mean even more Americans will be locked out of home ownership.
“Buyers are balking due to deteriorating affordability conditions and growing sticker shock,” Danushka Nanayakkara-Skillington, assistant vice president for forecasting and analysis at the National Association of Homebuilders, told Insider.
According to census data, only 13% of new home sales in June were priced below $300,000, compared to just a year ago that figure was 26%. During the month, the median selling price for new homes sold was $402,400, while the average selling price was $456,800.
As homeownership grew more expensive throughout the month, Commerce Department data showed U.S. housing starts, or the number of new homes that began construction, fell to a seasonally adjusted annual rate of 1.56 million units in June.
Although multi-family construction – units in buildings with five or more households – rose 10.3%, single-family construction fell 8.1% from May to the lowest reading since June 2020. The category saw annual construction fell to a pace of just under 1 million, well below the revised May figure.
“While the multifamily market remains strong on the back of solid rental housing demand, easing single-family construction data should send a strong signal to the Federal Reserve that tighter financial conditions are producing a housing slowdown,” said Robert Dietz, chief economist at the National Association of Homebuilders, previously told Insider.
NAHB data shows that rising inflation and interest rates have added up to $14,000 to the construction costs of an average newly built single-family home. As the costs weigh on builders – and home buyers burdened by rising mortgage rates – there has also been a rise in the number of buyers canceling agreements on the construction of new homes.
John Burns Real Estate Consulting reports the national cancellation rate among homebuilders hit 14.5% in June, marking the highest rate since April 2020 – signaling that more Americans are now struggling to afford to buy a home.