Lower Mortgage Rates Help to Boost New-Home Sales

With mortgage rates dropping slightly and limited home-price growth, new-home sales increased more than expected in August. According to data from housing marketing platform Zillow, there were 800,000 new single-family home sales nationwide in August, which is a 20.5% increase from the revised July rate of 664,000 and a 15.4% increase from the August 2024 estimate.

With increased new-home sales in August, the seasonally adjusted estimate of new homes that were for sale at the end of August was 490,000, which is a supply of 7.4 months at the current sales rate. This figure is lower than the 9 months of supply recorded in July and also slightly lower than the 8.2 months recorded in August 2024.

The combination of lower mortgage rates and the use of incentives helped builders sell more homes in August. Although the number of new homes available for sale remains above year-ago levels in most regions, it has now fallen lower in the South, the largest contributor of new homes for sale. The improvement in sales combined with a pullback in new building activity means inventory could be headed lower overall.

In August 37% of builders cut their prices, roughly unchanged from July. However, the use of sales incentives increased to 66% in August, up from 62% in July according to the National Association of Home Builders. Despite starting fewer projects, future sales expectations hit a 6-month high.