The number of new-home sales in July may have only fallen slightly from a month prior, but it is meaningfully lower than a year ago, according to data released Monday by the U.S. Census Bureau and the U.S. Department of Housing and Urban Development.
New-home sales dropped to 652,000 units in July, down 0.6% from June and down 8.2% annually.
Despite this decrease, economists like First American‘s Odeta Kushi, say that new-home sales exceeded expectations in July, which came after June’s numbers were revised upward.
As the pace of new-home sales slowed, inventory rose to 499,000 units at the end of July, up 7.3% compared to a year ago. On a monthly basis, however, inventory was down 0.6%. This supply represents 9.2 months of inventory at the current sales pace.
With inventory rising and home sales slowing, the median sales price posted both monthly and yearly declines in July. The figure of $403,800 was down 0.8% month over month and 5.9% year over year. This is the largest annual price decline since November 2024.
“Historically, new homes sell for more than existing homes, but that pattern has been upended in recent months as new home inventory has surged,” Lisa Sturtevant, chief economist at Bright MLS, said in a statement. “The median price of a new home sold in July was nearly $20,000 lower than the median sold price of an existing home.”
Regionally, new-home sales were down year over year in three out of the four regions, dropping 23.5% in the Northeast (26,000 units), 4.0% in the South (388,000 units) and 19.9% in the West (153,000 units). In the Midwest, new-home sales were up 4.9% annually in July to a pace of 85,000 units. Month over month, new-home sales were flat in the Northeast, down 6.6% in the Midwest, down 3.5% in the South and up 11.7% in the West.
“Builders have relied heavily on incentives, such as mortgage rate buydowns, upgrades, and even price reductions, to support demand and maintain an edge over the existing-home market,” said Kushi, First American’s deputy chief economist. “However, the recent pattern of sales — holding at relatively subdued levels — suggests these measures are becoming less effective amid strained affordability, rising resale inventory, and macroeconomic uncertainty.”
While new-home sales slowed in 2024, growth still remained positive, helping to offset the weaker existing-home sales pace, but economists are not so optimistic about 2025.
“This year, however, with existing home sales tracking below last year and new home sales substantially weaker, the overall 2025 housing market is set up to fall below 2024,” Sturtevant said.
But Kushi notes that new-home sales remain above pre-pandemic levels in contrast with existing-home sales.
Sturtevant is concerned that this will cause the overall economy to slow as housing makes up between 15% and 18% of the annual GDP.
“Tariff and immigration policies are making it harder for home builders to deliver more supply, but right now the constraint is on the demand side,” she said. “Builders are offering more incentives to entice home shoppers, but because the inventory of existing homes has grown and would-be buyers have more options and more negotiating power with sellers, they are less likely to be looking for new construction.”
But there may be good news on the horizon, as new-home purchase mortgage demand continued to grow in July.
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