August new home sales soared last month, according to the latest data by the U.S. Census Bureau, as the housing market broke out of the slump that characterized this summer.
Sales of new single-family homes in August were at a seasonally-adjusted annual rate of 800,000, according to estimates released jointly by the Census Bureau and the Department of Housing and Urban Development. That was 20.5 percent above the previous month’s rate of 664,000, and 15.4 percent above last year’s August rate of 693,000.
“New home sales broke out of their summer slump in August,” Realtor.com Senior Economist Anthony Smith said in a statement shared with Newsweek. “Sales were 15.4 percent above August 2024, marking the strongest pace of 2025 so far.”
Regionally, last month’s gains were higher in the Northeast, where they rose 72.2 percent from July, followed by the South (+24.7 percent), the Midwest (+12.7 percent), and the West (+5.6 percent).
Why Have Sales Improved?
Surprisingly, new home sales increased before mortgage rates fell to the lowest level in months in recent weeks, meaning that buyers did not take into consideration lower borrowing costs.
The likely number one reason why sales of new homes have increased across the country in August is that builders have been willing to slash prices and offer incentives to attract reluctant, cautious buyers.
A recent survey by the National Association of Homebuilders (NAHB) found that 37 percent of homebuilders cut prices last month, down from 38 percent in July but still historically high as developers dealt with supply headwinds across the country and growing economic concerns.
Despite widespread cuts, the median sales price for a new home was $413,500, up from $395,100 in July and 1.9 percent higher than a year ago, as more sales occurred in the mid- to upper-price ranges.
Even so, prices for new homes remain lower than for existing homes thanks to the incentives and discounts offered by builders over the past few months, making these properties more appealing to buyers.
But that might not last for much longer. “The gap between median price of existing homes and new homes is closing, with resale homes now selling for roughly $8,900 more than new construction,” Smith said. “Builders remain more willing than individual sellers to adjust prices, but even with these concessions, the market is still gauging how much demand can be coaxed back.”
In September, however, the number of builders offering price discounts went up again to 39 percent, according to NAHB—the highest percentage in more than five years.
What Is Happening To Inventory Levels?
The number of new homes for sale fell to 490,000 in August, down 1.4 percent from July, while months of supply dropped to 7.4 months from 9.0 in July and 8.2 one year earlier, Census data shows. This means that the current new home sale inventory in the U.S. housing market would be gone in 7.4 months at the current sale pace, if no additional inventory came about.
“The supply of new homes tightened notably as buyers stepped back into the market,” Smith said. While the U.S. market remains well-supplied, it is now less so than earlier in the summer, he said.
“By construction stage, about one in five homes for sale have not yet been started, while the share of completed homes, at roughly one quarter, continues trending toward pre-pandemic norms, giving shoppers more move-in-ready choices,” he said.
Dwindling inventory levels might eventually bring prices back up, especially if demand will grow in the coming months as a result of lower borrowing costs.
What Does This Mean For The U.S. Housing Market?
“August’s strong rebound provides welcome momentum heading into the fall selling season and this year’s best time to buy a home,” Smith said.
“Builders enter autumn with a leaner stock of unsold homes and a healthier sales pace, but they remain mindful of affordability constraints despite some easing in mortgage rates,” he added.
“Maintaining balance, by starting enough homes to meet demand without overcommitting, will be key as they plan new projects for late 2025 and early 2026.”
For Eric Teal, Chief Investment Officer for Charlotte-based Comerica Wealth Management, the recent uptick in new home sales does not suggest that buyers’ affordability troubles are over.
“There is pent-up demand in housing, but affordability remains out of reach for many first-time homeowners,” he said in a statement shared with Newsweek.
“Mortgage financing costs remain elevated, but time has started to break the gridlock, and inventories are starting to stabilize. However, going forward we believe a significant decline in long rates is needed to further stimulate demand, particularly given the recency bias of the low rates in 2021 and the lock-in effects of low-rate mortgages,” he added.
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