New-home sales retreat after big jump in prior month

By Aarthi Swaminathan

U.S. new-home sales fall in August, but still defy estimates

The numbers: Sales of newly built homes in the U.S. dipped in August, as home buyers pulled back in the face of high interest rates and home prices.

Sales of newly built homes in the U.S. fell 4.7% to an annual rate of 716,000 in August, from a revised 751,000 in the prior month, the Commerce Department reported Wednesday.

The number is seasonally adjusted and refers to how many homes would be built over an entire year if builders continue at the same pace every month.

The pace of sales was still at the highest level since April.

The new-home sales figure exceeded expectations on Wall Street. Economists surveyed by Dow Jones Newswires and The Wall Street Journal expected new-home sales to fall more sharply to 700,000.

The rate of new-home sales was down across the nation, except in the South.

The data from July was revised. New-home sales were revised to a 739,000 pace from an initial reading of 751,000.

The new-home sales data are volatile month-on-month and are often revised.

Key details: The median sales price of a new home sold in August fell to $420,600 from $429,000 in the prior month.

The supply of new homes for sale rose 6.8% between July and August.

New-home sales rose the most in the South by 2.7%, and fell across the rest of the U.S. In the Northeast, new-home sales fell by 27.3%, and in the West, by 17.8%.

Overall, sales of new homes nationally are up 9.8% compared to the previous year.

Big picture: Falling mortgage rates could be a headwind for home builders. But it's unclear when demand will pick up. So far home buyers have mostly held back as seen by mortgage-application data.

Builders continue to use sales incentives to keep buyers interested, as home prices continue to hit new highs. Consider the incentive offered by one of the biggest home builders in the U.S., Toll Brothers: The company is offering a temporary 2.99% mortgage rate in the first year for some buyers for select homes.

Nonetheless, builders are feeling more optimistic about the housing market as seen in the latest builder-confidence survey, as demand from home buyers is expected to ramp up.

What are they saying? "The resilience of new home sales during the summer, in contrast to further weakness in existing home sales in recent months, is a welcome development for builders, who were sitting on bloated inventories after a disappointing spring selling season," Stephen Stanley, chief economist at Santander U.S., wrote in a note.

But builders are sitting on a number of new homes completed, which have yet to be sold, which was concerning, he added.

The number of new homes that were completed in August was at the highest level since 2009, Stanley noted.

Market reaction: Most major home-builder stocks such as D.R. Horton (DHI), KB Home (KBH), Lennar (LEN) and Toll Brothers (TOL) were down in early trading on Wednesday. The yield on the 10-year note was under 3.8%.

-Aarthi Swaminathan

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09-25-24 1032ET

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