New Home Sales Plummet To 14-Month Low

New home sales fell for the third consecutive month in June to their lowest level since April 2020, according to new data from the U.S. Census Bureau and the Department of Housing and Urban Development.

What Happened: Last month, sales of new single‐family houses were at a seasonally adjusted annual rate of 676,000, down 6.6% from the revised May rate of 724,000; it was previously at 769,000.

Last month’s figures also represented a 19.4% percent drop from the estimate of 839,000 recorded in June 2020. This marked the first year-over-year decrease in new home sales since the COVID-19 pandemic began.

The seasonally‐adjusted estimate of new houses for sale at the end of June was 353,000, which represents a 6.3-month supply at the current sales rate. This is a 46.5% year-over-year increase.

Related Link: Housing Economist Sanders: Home Price Growth Rate 'Is Not Sustainable'

What This Means: New home sales represent a relatively small percentage of the overall housing market. Last week, the National Association of Realtors reported total existing-home sales were up 1.4% from May to a seasonally adjusted annual rate of 5.86 million in June, while year-over-year sales climbed 22.9% from 4.77 million in June 2020.

"Supply has modestly improved in recent months due to more housing starts and existing homeowners listing their homes, all of which has resulted in an uptick in sales," said Lawrence Yun, NAR's chief economist. "Home sales continue to run at a pace above the rate seen before the pandemic."

The new data, however, represents a combination of difficulties facing home builders. Robert Dietz, chief economist for the National Association of Home Builders, stated the new data “came in lower than expected, and we anticipate an upward revision next month.”

Yet Dietz also warned builders are facing challenges that aren't abating.

“Nonetheless, sales have trended lower as construction costs have increased and builders have sought to manage material delays and cost challenges in the construction pipeline, in addition to dealing with shortages of lots and labor in many housing markets,” he said.