New home sales dropped 12.6% since June to an annual rate of 511,000, 29.6% lower than July 2021, the Census Bureau said Tuesday. Sales came in well below the 585,000 economists had anticipated, and the slow pace means that the number of homes on the market would take about 11 months to sell out at the current rate—the longest period of time since 2009. The housing market is in the midst of a pivot away from the extreme seller’s market that’s prevailed during the pandemic, improving the outlook for potential buyers. Higher mortgage interest rates—a consequence of the Federal Reserve’s anti-inflation interest rate hikes—have dramatically increased the monthly mortgage payments necessary to buy a house, driving many buyers out of the market and making homes that much harder to sell. That’s put a lid on home prices that have spiraled upwards in recent years. “The housing market is cooling off fast,” Matthew Walsh, an economist at Moody’s Analytics, wrote in a commentary. “The Federal Reserve is getting what it wants. The housing market needed to cool, and higher interest rates were the only thing that was going to accomplish that.” Have a question, comment, or story to share? You can reach Diccon at dhyatt@thebalance.com.
