New Home Sales Drop in July Even as Inventory Rises

By Mark Lieberman

Managing Director and Senior Economist


  • Pace of contracts for new home sales FELL 1.7 percent in July to 627,000 (Seasonally Adjusted Annual Rate);
  • The sales pace for June was revised up 7,000; without the revision, the July month-month decline would have been less than one percent;
  • Unsold inventory increased 6,000 in July to 309,000 but the inventory for June was revised upward to 303,000 from 301,000;
  • The months’ supply of new homes for sale ROSE to 5.7 in July from 5.5 in June
  • Median price of a new home JUMPED $18,700 from June to $328,700;
  • Year-year the median price of a new home was UP $5,800 (1.8 percent)


  • The July sales rate was the weakest since last October (618,000):
  • New home sales in July were up 1.8 percent from July 2017, despite the increase in the median price;
  • The increase in the median price of a new single-family home was only the second month-month increase this year (in March the median price rose 6.0 percent);
  • The inventory of new homes for sale has now increased in all but four months in the last two years.

Data Source: Census Bureau and Department of Housing and Urban Development

Image result for new home sales

The standard explanation for weak home sales – new or existing – has been a lack of inventory. The report of new homes for July put the lie to that argument.

The inventory of new homes for sale at the end of the month rose for the 20th time in the last 24 months (it was flat month-month in two of those months) suggesting strongly something else is at work depressing home sales.

The sales pace in July was exactly where it was in July 2016 – some month-month gyrations notwithstanding.

In that 24-motnh span, the sales rate peaked at 712,000 last November, but also fell as low as 548,000.

Among the factors conspiring to tamp down home sales: stagnant wages despite a “seller’s” job market; mortgage interest rates creeping up (3.44 percent for a 30-year fixed rate loan in July 2016 to 4.53 percent this year and the still-present debt load of borrowers in the prime home-buying age cohort. According to a new study, more than one million borrowers default on student loans each year and nearly 40 percent are expected to default by 2023. The findings by Ameritech Financial also noted “Defaulting borrowers are less likely than their non-defaulting counterparts to be able to take on debt that requires a risk assessment like a credit card, auto loan or mortgage. Defaulters are also more likely to face bill collectors because they fell behind on their utility or medical bills.

The new sales data appears to be at odds with still high confidence levels reported by the National Association of Home Builders and with the slight uptick in single-family permits and starts in July as reported by the Census Bureau and Department of Housing and Urban Development.

Builders continue to build adding to inventories. In the last two years, completion of new single-family homes has exceeded sale by about 188,000 per month.

Hear Mark Lieberman on P.O.T.U.S. (Sirius-XM 124) Friday at 6:20 am Eastern Time. You can follow Mark Lieberman on Twitter at @foxeconomics.

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