New Home Prices See Decline Amid Incentives
The prices of newly built homes saw a decrease in August as builders introduced larger incentives to attract buyers struggling with affordability issues. According to the U.S. Census Bureau, the median sales price of new homes dropped to $420,600 in August, marking a 4.6% decline from the previous year and a 2.1% dip from July.

Existing Home Prices Rise as Sales Slow
In contrast, the median price for existing homes increased by 3.1% to $416,700 in August, as reported by the National Association of Realtors®. However, sales of existing homes have slowed, with many buyers holding off in hopes of lower mortgage rates in the near future.

New Home Sales Drop, But Year-Over-Year Growth Remains Positive
Sales of new single-family homes declined by 4.7% in August compared to July, with an annualized rate of 716,000 homes. Despite this monthly drop, new home sales were up 9.8% from the previous year when mortgage rates were significantly higher. In August, the average 30-year fixed mortgage rate was 6.5%, down from over 7% the year before.

Lower Mortgage Rates Could Boost Homebuyer Interest

Falling Mortgage Rates May Spur Homebuying
Bright MLS Chief Economist Lisa Sturtevant expects that as mortgage rates continue to drop, more buyers may re-enter the market this fall. However, the growing inventory of existing homes could reduce demand for newly constructed homes. Lower mortgage rates typically fuel price growth, but affordability remains a key issue, limiting many buyers’ purchasing power.

Builders Offer Incentives and Focus on Affordable Homes
To address affordability concerns, homebuilders have ramped up incentives such as mortgage rate buy-downs, price reductions, and credits for closing costs. Many builders, like Lennar, have also shifted focus toward constructing smaller, more affordable homes for first-time buyers. Lennar recently reported a 6% decrease in its average home sales price, primarily due to incentives and a focus on smaller floor plans.

Market Sees Shift Toward Affordable New Homes

Increase in Sales of Lower-Priced Homes
Census data reveals a growing market share for new homes priced under $300,000, which accounted for 18% of new home sales in August, up from 12% a year earlier.

Inventory of New Homes on the Rise

New Home Supply Grows
The supply of new single-family homes increased by 1.7% in August, reaching 467,000 homes, which represents a 7.8-month supply at the current sales pace. Completed, move-in-ready homes hit 105,000, the highest level since 2009, but they represent just 22% of total new-home inventory, which also includes homes at various stages of construction.

Market Still Below Balanced Supply Levels
National Association of Homebuilders Chief Economist Robert Dietz noted that while a 7.8-month supply of new homes may seem high, the existing home market has only a 4.1-month supply. Overall, the combined supply of new and existing homes remains below the six-month threshold for a balanced market. However, this measure could increase as more home sellers test the market in the months ahead.