US New-Home Sales Remain Tepid on Affordability Constraints
Sales of new homes in the US remained weak in June as builders’ heavier use of sales incentives failed to motivate buyers put off by high costs.
Contract signings on new single-family homes increased 0.6% to an annualized rate of 627,000 last month, according to government data released Thursday. That fell short of the 650,000 median estimate in a Bloomberg survey of economists.
June’s results show US homebuilders are struggling to offset an ugly mix of high prices and borrowing costs by offering incentives and subsidizing customers’ mortgage rates, which risk eroding profit margins.
This week, Atlanta-based PulteGroup Inc. posted better-than-expected earnings, despite reporting a slowdown in orders. Sales incentives have grown to 8.7% of its houses’ gross sale price, more than double a “normal” incentive load, executives said on an earnings call.
“I long for the days of more normal incentive loads of kind of 3% to 3.5%,” Chief Executive Officer Ryan Marshall said on the earnings call. “Hopefully as we get out into kind of future years, that will become possible again.”
An industry survey showed 37% of homebuilders reporting cutting prices in June, and climbed even higher in July to a record in monthly data back to 2022. That poll also revealed weak trends in traffic of prospective buyers amid affordability constraints, which similarly restrained sales of previously owned homes last month.
“In line with yesterday’s soft existing home sales figure, these numbers underscore that housing demand has downshifted in recent months,” Stephen Stanley, chief economist at Santander US Capital Markets, said in a note. “Barring a steep fall in mortgage rates, which seems unlikely, there is little reason to expect a quick revival.”
Source : Bloomberg
