New Home Sales Tumble in August

New single-family home purchases plummeted 8.7% to a seasonally adjusted annual rate of 675,000 units, the Commerce Department reported Wednesday. Sales remain up about 5.8% from the same time one year ago.

“The pace of new home construction is slowing, but there is still a large backlog of homes in the funnel that should continue making their way to the market in the coming months, giving more opportunities for home buyers to jump on the new construction train,” said Nicole Bachaud, Zillow senior economist.

At the current pace of sales, it would take roughly 7.8 months to exhaust the inventory of existing homes. Experts view a pace of six to seven months as a healthy level.

The decline in sales indicates that a resurgence in mortgage rates is pushing many would-be buyers out of the market. That slowdown in demand contributed to a decline in prices last month.

The median price for a new home fell to $430,000 from $436,700 the previous month. Still, that remains far higher than the typical pre-pandemic level.

Rates on the popularĀ 30-year fixed mortgageĀ are currently hovering around 7.19%, according to Freddie Mac, well above the 6.29% rate recorded one year ago and the pre-pandemic average of 3.9%.