New home sales retreat in June
|Summary
Lower rate expectations tomorrow dent new home sales today
The housing market continues to lose momentum. New home sales dipped 0.6% in June to a 617K annual rate, a weak outturn when contrasted with expectations for a modest improvement. Although prior data were revised higher, the pace of new home sales in June remained at its lowest level since November 2023 and 7.4% below its year-ago rate. Prices softened year-over-year, and inventories rose on the slower sales pace. Despite increased use of builder incentives, pervasively high financing costs appear to be one hurdle that builders cannot overcome at the present moment. The average 30-year fixed mortgage rate trended slightly lower in June but remained close to 7.0%.
Builders report that buyers are in wait-and-see mode amid expectations for lower mortgage rates later this year. As inflation continues to progress toward target and the labor market shows signs of softening, we continue to expect the first Federal Reserve rate cut in September. If realized, lower rate expectations would likely prompt mortgage rates to retreat more meaningfully and help to reignite buyer interest.
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