By Rob Sabo
Mortgage rates remain stubbornly high, but that didn’t stop 800,000 Americans from buying new homes in August.
New residential sales spiked by a seasonally adjusted 20.5 percent from July and were up 15.4 percent year over year, the Census Bureau and Department of Housing and Urban Development reported on Sept. 24.
Some of the jump in new-home sales can be attributed to a modest drop in mortgage rates after the Federal Reserve initiated a 25 basis-point reduction to its federal funds rate at its Sept. 17 policy meeting of the Federal Open Market Committee (FOMC).
“New-home sales experienced a significant surge in August, while builder confidence held steady at a low reading in September,” said Buddy Hughes, chairman of the National Association of Home Builders (NAHB) and a home builder and developer in Lexington, North Carolina.
“While this month’s figure may be subject to downward revision, we do expect a general improvement in sales over the coming months, supported by the recent decline in mortgage rates.”
The seasonally adjusted rate of 800,000 new-home sales in August would be the pace of sales spread across 12 months. New homes don’t have to be completed to be counted—homes can be under contract or merely have a deposit accepted in order to count toward the sales data.
Rates for a 30-year fixed mortgage dipped to 6.34 percent on the heels of the Federal Reserve’s rate cut, which led to a slight uptick in mortgage applications for the week ended Sept. 19, the Mortgage Bankers Association (MBA) said. Applications increased by 0.6 percent from the prior week, the MBA noted.
Mike Fratantoni, chief economist and senior vice president of the Mortgage Bankers Association, said refinance activity accounted for more than 60 percent of all mortgage applications.
“Interest rates generally have moved up following the FOMC meeting last week, but remain in a range that should continue to lead to increased refinance activity,” Fratantoni said. “Refinance volume increased further last week, and is now 80 percent higher than four weeks ago.”
Jing Fu, senior director of forecasting and analysis for the NAHB, said the downward trend in mortgage rates, coupled with the Fed’s recent rate cut, is a positive sign for new housing demand.
“If this momentum continues, we expect new home sales to gain traction as more buyers reenter the market in the final quarter of 2025,” Fu said.
The Census Bureau report noted that seasonally adjusted estimates for new-home inventory stood at 490,000 residences in August, a 1.4 percent decline from July estimates. That’s about 7.4 months of supply, which is just over 8 percent lower than year-earlier estimates.
The median sales price, meanwhile, was $413,500 in August—a nearly 5 percent increase from July. According to the NAHB, builders have stimulated new-home sales by dropping prices or adding sales incentives to entice potential buyers.
Eric Teal, chief investment officer for Comerica Wealth Management of Charlotte, North Carolina, said in a note sent to The Epoch Times that although there is pent-up demand for housing, affordability remains out of reach for many first-time homeowners.
“Mortgage financing costs remain elevated, but time has started to break the gridlock, and inventories are starting to stabilize,” Teal said.
“However, going forward, we believe a significant decline in long rates is needed to further stimulate demand, particularly given the recency bias of the low rates in 2021 and the lock-in effects of low-rate mortgages.”
