New home sales fell to a seasonally adjusted annual rate of 571,000 units in July. This was well below consensus estimates and roughly 9 percent lower than last years rate of 627,000 units according to Census Bureau numbers. The median price of a new home contracted in July was $313,700 and the average price of a new home in July was $371,200. Sharp price increases compared to last year help to explain the sharp decrease in new home sales activity in July. On a positive note, the three previous months of sales were revised higher.

A slight increase in mortgage rates also helped to make homes even more expensive for prospective buyers in July. With new home prices at elevated levels, it is not surprising to see volatile (if not stagnating) new home sales volume. As a reminder Census counts new homes sales as of contract signing, not an actual closing. Some new home contracts do not make it to closing because a number of things can change in the span of 4-8 months.

New Home Sales vs Mortgage Rates

The simple truth is that new homes are still too expensive for many Americans, and builders are having a difficult time bringing cheaper homes to market.¬†Here in Dallas Texas home prices are still chasing the Federal Reserve’s liquidity. That is not an ideal situation. Without additional QE, home prices will eventually revert back to the mean unless wages increase in tandem.home prices