The new home market’s hot streak has turned lukewarm, with the U.S. Census Bureau reporting that annual single-family home sales declined 6.6 percent year over year to a seasonally adjusted rate of 627,000 in June. Monthly new home sales trends weren’t much better, only eking out a 0.6 percent increase from May.
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Similar to the existing-home sales market, elevated mortgage rates and slowing homebuyer activity have led to rising inventory and cooling home price growth. In June, the seasonally adjusted estimate of new houses for sale increased 8.5 percent year over year to 511,000, representing 9.8 months of supply at the current sales pace. Meanwhile, the median sales price for new homes declined 2.9 percent annually to $401,800.
Dr. Lisa Sturtevant
Bright MLS Chief Economist Lisa Sturtevant said the housing market is “very different” than it was a year ago, as new and existing home inventory surpasses 2 million, a 300 percent increase from 2024, when combined inventory was less than 500,000.
“New home inventory continued to increase as buyer traffic has slowed,” she said in an emailed statement. “At the end of June, there was 9.8 months of supply of new single-family homes, the highest level since November 2022 and up from 8.4 months of supply last June … The combined new and existing inventory is also significantly higher than it was before the pandemic.”
Sturtevant said the June report marks a significant change for the new home market, as the median new home is 7.7 percent cheaper than the median existing home, a 180-degree shift from the early pandemic, when median new home prices were 15 to 20 percent higher than median existing home prices.
“Builders are facing a very different economic climate in 2025. Year-to-date, new home sales are tracking far below last year’s level, and there is nothing to suggest a rebound in the new home sales market in the second half of 2025,” she said. “New single-family construction is lower than a year ago and mortgage rates are stubbornly stuck in the high 6 percent range. At the same time, buyers who remain in the market have more choices as the inventory of existing homes continues to increase.”
Joel Berner
Realtor.com Senior Economist Joel Berner echoed Sturtevant in his commentary, pinning the new home market’s struggles on mortgage rates. However, he said homebuilders are proving their resilience by shifting their efforts to smaller, more affordable options. Still, that may not be enough to lift the market out of a growing slump.
“…The harsh reality [is] that demand for homes is waning as more buyers simply decide that they cannot afford a new home purchase under current market conditions,” he said in an emailed statement.
Regionally, new home sales are down across the board, with the Midwest serving as an outlier with monthly (+6.3 percent) and annual (+9 percent) gains. Meanwhile, the Northeast logged the greatest monthly (-27.6 percent) and annual (-34.4 percent) losses.
“The Northeastern downturn is a bit surprising, as that region is the most supply-constrained and has seen the strongest price growth in the housing market at large,” he said. “The gross volume of new home sales in the Northeast is so small that the data trends tend to be noisy. The Midwest is the next most supply-constrained region, so the improvement in new home sales there is an encouraging development.”
Berner said mounting headwinds are stopping homebuyers from entering the new home market despite the opportunity to find a great deal.
“For the first time in the past year, there are more new homes for sale (121,000) that have not yet been started than new homes that are completed and for sale (199,000),” he said. “Builders are showing reluctance as well, preferring to get a commitment from a buyer first to start their projects rather than forging ahead and potentially being left with completed inventory they may struggle to sell.”
Although things are looking bleak now, a recent Inman report provided a faint silver lining on homebuying activity.
The Mortgage Bankers Association’s latest Weekly Mortgage Applications Survey revealed requests for purchase loans increased by a seasonally adjusted 3 percent week-over-week and 22 percent year-over-year, despite 30-year fixed mortgage rates reaching a four-week high of 6.84 percent. The average purchase loan request amount was down 7 percent from March, dropping from $460,000 to $426,700.
“The increase in mortgage purchase applications of late has been accompanied by a further recovery in the number of existing homes on the market, which ticked up to 4.2 months of sales in June, the highest in more than five years,” Pantheon Macroeconomics Senior U.S. Economist Oliver Allen said in the report.
However, additional home price drops “probably are required for the market to clear,” he added.
