New Home Sales Climb to Eight-Month High, Fueled by Price Reductions
Despite a rise in mortgage rates, August saw a significant increase in new home sales as builders offered incentives to attract buyers.
Sales of new single-family homes in the U.S. reached an eight-month high in August, as prospective buyers were drawn in by price cuts and builder incentives. This surge occurred despite an increase in mortgage rates, influenced by geopolitical events in the Middle East.
According to data released by the Commerce Department's Census Bureau, new home sales rose 6.4% to a seasonally adjusted annual rate of 684,000 units in August. This marks the highest sales volume since December 2025. The July data was also revised upward, showing sales at a rate of 643,000 units, an increase from the previously reported 607,000 units.
Economists surveyed by Reuters had anticipated a slower pace, forecasting sales to reach 615,000 units. New home sales are considered a timely indicator of housing demand as they are recorded at the contract closing stage, although they represent a smaller portion of the overall U.S. housing market.
Regional sales performance varied. The Midwest saw a substantial increase of 84.9%, and the South experienced a 6.9% rise. However, the Northeast reported a significant drop of 36.1%, and the West saw a 15.2% decrease. On a year-over-year basis, new home sales decreased by 2.0% in August.
The conflict between the U.S. and Iran has contributed to rising energy prices and consequently, higher longer-term Treasury yields and mortgage rates. The average rate for a 30-year fixed mortgage has climbed nearly 1 percentage point since late February, reaching 6.95% last week, the highest level recorded since January 2025, according to data from Freddie Mac.
A recent survey by the National Association of Home Builders indicated a decline in builders' expectations for home sales in the coming six months, prompting many to implement price reductions and offer incentives.
The median price for a new home fell 5.8% in August compared to the previous year, settling at $393,700. A majority of homes sold in August were priced below $499,999.
Despite price adjustments, the inventory of unsold new homes remains substantial, potentially limiting builders' capacity to initiate new housing projects. The supply of new houses available on the market was consistent with previous months, totaling 483,000 units, with more than half of these properties currently under construction. At the August sales pace, it would take an estimated 8.5 months to sell the existing inventory, a slight decrease from the 9.0 months reported in July.