According to Jeff Andrews of HousingWire, monthly new-home sales jumped by 10.6% in July and 5.6% year over year. This results from builders benefiting from elevated mortgage rates and ample supply, allowing them to offer rate concessions and more choices to buyers. However, this advantage shrinks as mortgage rates decline and the inventory gap between new and existing homes narrows. With more existing homes coming to market and sellers becoming more willing to negotiate, buyers may increasingly turn to lower-priced existing homes, potentially softening demand for new builds.

Source: HousingWire (August 2024)

Robert Dietz of the National Association of Home Builders (NAHB) comments on the data, highlighting that new home sales estimates by the Census Bureau, which are often volatile and subject to revision, don’t fully align with industry survey data showing current sales weakness. The July estimate of 739,000 units sold is based on sales contracts signed or deposits accepted at any construction stage, with total new home inventory slightly down to 462,000 units, representing a 7.5-month supply. Although the median new home price rose to $429,800, regional sales showed mixed results, with increases in the Northeast, Midwest, and West but declining in the South. 

Reuters reports that the data surpassed economists’ expectations of a 625,000 unit pace despite the volatility often seen in month-to-month data. The average 30-year fixed mortgage rate dropped to 6.46%, its lowest since May 2023, and is expected to further decrease with an anticipated Federal Reserve rate cut in September. While this could boost future sales, the broader housing market showed mixed signals: existing home sales exceeded expectations in July, but single-family housing starts fell to a 16-month low, partly due to Hurricane Beryl, and permits for future construction also declined.

Indeed, according to Orphe Divounguy of Zillow, mortgage rates have been easing since May, leading to a rebound in new home sales and slight improvements in housing affordability despite a cooling labor market. Buyers’ sensitivity to even slight rate declines underscores the ongoing affordability challenges, pushing more buyers toward new construction. New homes are often cheaper per square foot than existing homes in many major markets. In July, 31% of builders reduced prices to boost sales, and 61% offered incentives like rate buydowns.

Logan Mohtashami of HousingWire comments on new home sales, noting that:

“I know this report will be revised lower, but it is precisely what we needed, showing the value of lower mortgage rates. If we want to build a lot of homes, we will need to have the demand for them,and lower mortgage rates will be the crucial variable in getting single-family permits to stop falling and grow again.”

Jackson Hole

Jeanna Smialek of the New York Times reports on the Jackson Hole Economic Symposium, hosted by the Federal Reserve Bank of Kansas City in Wyoming, which is a premier annual event where central bankers, economists, and financial leaders gather to discuss major economic issues and policy shifts. The event has become critically important for global markets despite its remote location. Fed chairs, including Jerome Powell, often use this platform to signal significant policy changes, such as the anticipated interest rate cuts discussed at this year’s conference, reflecting the Fed’s growing confidence in controlling inflation.

Mark Porter and Joe Bavier of Reuters report on the meeting, highlighting that the U.S. dollar fell last week as Federal Reserve Chair Jerome Powell signaled a likely interest rate cut in September. Traders now indicate a 65% chance of a quarter-percentage-point rate cut at the Fed’s upcoming meeting, with a one-in-three chance of a more significant 50-basis-point cut. The dollar index, which measures the greenback against six major currencies, dropped by 0.81% following Powell’s remarks.

According to the CME Group, there is a 71.5% chance of a 0.5% rate cut during the September meeting.

Source: CME Group (August 2024)

Fergal McAlinden of MPA Magazine reports on the potential rate cut, noting that Powell signaled that interest rate cuts are imminent due to cooling inflation and a slowing labor market, speaking at the Jackson Hole conference. While he did not specify the cuts’ timing or size, markets expect at least a 25-basis-point reduction in September. Powell expressed confidence in inflation returning to the Fed’s 2% target, but significant changes in mortgage rates are unlikely, as these expectations are already priced in.

Julie Taylor of Realtor.com highlights a potential cut following rates that have reached a 23-year high over the past few years. A 25-basis-point cut is widely expected, possibly a 50-basis-point cut, depending on upcoming inflation and labor market data. These anticipated cuts have already begun to lower mortgage rates, with forecasts suggesting rates could drop to the low 6% range by the end of the year, potentially easing conditions in the real estate market.

25K downpayment assistance

Keith Griffith of Realtor.com reports that Vice President Kamala Harris has proposed a $25,000 federal down payment assistance plan for first-time homebuyers as part of her 2024 presidential campaign. The plan, which expands on a previous proposal by President Biden, is intended to help up to 4 million buyers over four years. However, experts warn that this could further inflate home prices in an already tight market, as increased demand without corresponding supply could drive costs higher. The proposal has sparked debate, with concerns about its impact on the housing market and its potential to exacerbate affordability challenges.

Chris Clow of HousingWire reports on the proposal, noting that it will likely involve direct monetary assistance rather than a tax credit. It aims to help over 4 million buyers in four years. However, it will roll out only after addressing housing supply issues. While expanding access to homeownership, the proposal raises questions about its implementation and impact on the housing market, echoing similar initiatives by Harris’s running mate, Tim Walz, in Minnesota.

MJ Lee, Tami Luhby, and Samantha Delouya of CNN report that the plan also includes tax incentives for starter home construction and a $40 billion innovation fund for affordable housing. Harris’s proposals expand on initiatives from the Biden administration and include measures to curb rent hikes by blocking price-setting tools and discouraging bulk purchases of rental properties by investors. As housing costs and affordability remain critical issues, Harris’s plan seeks to bridge the gap between rising prices and many Americans’ economic challenges.

Antonio Pequeño IV of Forbes says the plan aims to support working families who have consistently paid rent on time for two years, with additional benefits for first-generation homeowners. While specifics on eligibility and the mechanism for delivering the support are still unclear, the plan is part of a larger economic agenda that includes measures to curb price gouging, support housing construction, and address other critical economic challenges.

According to Justin Sink of Bloomberg, the plan also includes measures to increase housing supply by incentivizing the construction of 3 million new units and doubling funding for affordable housing projects. However, the proposal has sparked criticism from GOP rival Donald Trump, who labeled it as “Venezuela-style communism,” reflecting the political tensions surrounding the housing crisis and economic policy in the 2024 election.