According to data from the Census, new home sales in June 2024 were estimated to be at a seasonally adjusted annual rate of 617,000. This represents a slight decrease of 0.6 percent from the revised May rate of 621,000 and a 7.4 percent decrease from the June 2023 estimate of 666,000.
While the new home sales market is not collapsing, there are concerns about the ability of builders to sell and build more homes given the current mortgage rates. The Federal Reserve plays a key role in determining the direction of these rates and thus influencing the market.
Active inventory above pre-COVID-19 levels
Although the new home sales market does not offer a large number of active completed homes for sale, the inventory levels are now above those seen before the COVID-19 pandemic. Builders are cautious about rushing into new projects with mortgage rates at their current levels, as profitability is a key consideration for them.
Monthly supply: 9.3 months
For Sale Inventory and Months’ Supply: The seasonally-adjusted estimate of new houses for sale at the end of June was 476,000, resulting in a supply of 9.3 months at the current sales rate.
Builders typically adjust their permit issuance based on the monthly supply levels. When the supply exceeds 6.5 months, builders tend to pause on new permits until sales show signs of improvement.
Breakdown of supply data
It’s important to distinguish between completed homes for sale, homes under construction, and homes not started yet when analyzing supply data. The current levels of homes under construction and those not started yet indicate a cautious approach from builders in light of the market conditions.
While the new home sales report may not be overwhelmingly positive, it is important to note that the situation is manageable compared to previous market cycles. However, smaller builders may face challenges if mortgage rates do not decrease in the near future.