Sales of new single-family homes in the United States returned modestly in June after two months of declines, according to Census Bureau data from the Commerce Department.
New home sales rose 1.6% in June to a seasonally adjusted annualized rate of 628,000 units, up from May's upwardly revised pace. These figures, which are recorded at contract closings, represent a small portion of overall U.S. home sales and are known to move sharply on a month-to-month basis. On an annual basis, new home sales were down 5.6% in June compared with the same month a year earlier.
Economists polled by Reuters had expected a sales pace of 610,000 units for June. The median price for a new house in June was $398,300, a decline of 2.7% from the year-earlier level.
Analysts point to steep borrowing costs as a persistent headwind for the housing market. The average interest rate on a 30-year, fixed-rate mortgage - the most common U.S. home loan - has recently climbed to its highest level since last August, leaving little immediate relief for would-be buyers. Freddie Mac reported this week that the average 30-year mortgage rate nationally had risen to 6.58%. A day earlier, the Mortgage Bankers Association said the 30-year mortgage contract rate reached 6.69% in the week ended July 17. Both readings were the highest in 11 months.
Mortgage rates have increased by around 0.60 percentage points since late February, following U.S. and Israel attacks against Iran, a development that pushed up global oil prices and contributed to broader inflationary pressures. Prices measured by the gauge the Federal Reserve uses for its 2% inflation target are now rising at roughly twice that pace, and bond markets expect the Federal Reserve to respond with rate hikes.
The Fed is scheduled to hold a policy meeting next week. Rate futures imply approximately a one-in-three chance of a rate increase at that meeting, with the likelihood rising to nearly 100% for the subsequent meeting in September. Meanwhile, 10-year Treasury note yields - an important benchmark for 30-year mortgage pricing - have climbed by about a quarter of a percentage point so far this month and sit near an 18-month high.
Taken together, the data depict a housing market still under pressure from elevated financing costs and inflation-related tightening in financial markets, factors that continue to limit the pool of active homebuyers despite the uptick in new home closings in June.