Buyers get used to mortgage rates and incorporate them into decisions, but increases/decreases make them wonder if they should move quickly or hope they come back down.
NEW YORK – Despite the highest mortgage rates in a generation, new houses continue to sell. The U.S. Commerce Department on Wednesday reported that a seasonally adjusted 714,000 new homes sold in July (seasonally adjusted rate). That compares to 684,000 in June and 543,000 in July last year.
Sales were well below the 1.03 million clocked in August 2020 when home buying was surging, but still at a faster pace than the pre-pandemic year of 2019, when 683,000 new homes sold.
One reason new-home sales rebounded is that buyers got somewhat used to seeing higher rates. The other reason is that few existing homes hit the market because most current homeowners pay much lower mortgage rates than what is prevailing now. They’re hesitant to move, impacting the supply of existing homes for sale.
“The supply-demand imbalance created by a lower resale inventory compounds the impact of the persistent underbuilding of homes over the past 15 years,” says Toll Brothers Chief Executive Douglas Yearley. “Even before resale inventory dropped, there was a structural shortage of anywhere between three and six million homes in this country.”
Analysts are uncertain about what level of mortgage rates will throw at least a temporary damper on new-home sales. Even if they have the means to pay it, a lot of would-be buyers might balk at a 30-year mortgage at 8% – at least until they get used to it.
Source: Wall Street Journal (08/23/23) Lahart, Justin
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