New home sales fell in June as the housing market suffered from higher mortgage rates.
New home sales fell 0.6% from May to a seasonally adjusted annual rate of 617,000, according to a Wednesday report from the Census Bureau. The number of new home sales is 7.4% lower than it was in June of last year.
The pace of new home sales is now the lowest since November 2023.
The median sales price for a new home was $417,300 in June.
As of Wednesday, the average rate on a 30-year, fixed-rate mortgage was at 6.87%, according to Mortgage News Daily, which tracks daily changes in rates. That is down from a peak last year of above 8%, although is still much higher than in the years prior to the pandemic.
There has been a unique dynamic at play in the housing market because of the higher mortgage rates. Many people are holding on to their existing homes and waiting to sell until mortgage rates are lower, creating a shortage of existing homes for sale.
In more bad news for the housing market — and another sign of just how unaffordable housing is right now — existing home sales in June fell 5.4% to a seasonally adjusted annual rate of 3.89 million, the National Association of Realtors reported on Tuesday.
Despite sales falling, the median price of an existing home in June was $426,900, an all-time high and an increase of 4.1% from the year before.
The Mortgage Bankers Association also announced on Wednesday that mortgage demand dropped over the past week. Purchase demand is 15% lower than it was last year.
“Purchase applications decreased as ongoing affordability challenges persist with rates at their current levels and with home-price appreciation still strong in many markets,” said Joel Kan, MBA’s vice president and deputy chief economist.
The challenges with the housing market come in an election year where the economy and inflation have become the No. 1 issue with voters. Inflation, which began ticking up shortly after President Joe Biden was sworn into office, has rankled U.S. households and made life generally more unaffordable.
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Because of the too-high inflation, the Federal Reserve has been forced to hike interest rates to the highest level they have been since the dot-com bubble at the turn of the century. The higher rates have slowed the pace of inflation, but have made it more unaffordable to take on debt and secure an auto loan or purchase a home.
Republicans will be working to tie Vice President Kamala Harris, who is now the expected Democratic nominee for president, to the economy under Biden. The Biden administration, meanwhile, has attempted to focus on the bright spots in the economy like low unemployment and continued economic output.