Sales of newly built homes surged 20.5% in August compared with July, marking the strongest level since January 2022 and the largest monthly gain since August 2022, according to U.S. Census data. Sales were also 15.4% higher than in August 2024, reflecting unexpected strength in the housing market despite elevated mortgage rates.
The August figures are based on contracts signed during the month, when the average 30-year fixed mortgage rate hovered around 6.63%. Rates did not begin to decline until September, dropping to a three-year low of 6.13% just before the Federal Reserve’s rate cut, before rising again to 6.37%. The sharp jump in August sales, before rate relief arrived, has left economists questioning the underlying drivers.
Robert Dietz, chief economist at the National Association of Home Builders, noted that the margin of error in new home sales reports is large, cautioning that revisions may temper the headline figure. Similarly, Ivy Zelman of Zelman & Associates described the reported jump as “directionally right, but the magnitude was way too high.” Her firm’s survey, covering 15% of builders, indicated a 6% increase year over year.
While homebuilders have widely promoted price cuts and incentives to entice buyers, the median price of a new home sold in August rose 1.9% from the prior year to $413,500. Builder sentiment surveys reveal that 39% of builders reported cutting prices in September, up from 37% in August — the highest share since the pandemic period.
Regionally, sales strength was most notable in the Northeast, where limited construction means monthly swings can be exaggerated, and in the South, which remains the hub of U.S. homebuilding activity. Sales in the West, where home prices remain highest, were comparatively weaker.
Peter Boockvar, chief investment officer of One Point BFG Wealth Partner, suggested that heavy builder incentives were the main catalyst for August’s surprising numbers. He added that lower mortgage rates in September may further support sales, but builders could scale back incentives if rates decline significantly, potentially offsetting the benefits for buyers.
The surge in sales reduced housing inventory to a 7.4-month supply in August, down from nine months in July, an 18% drop. At the same time, single-family housing starts and permits slowed compared with both July and August of last year, suggesting builders were preparing for softer demand.
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