The leading indicator of new home sales in the US unexpectedly plummeted, while important housing price indices reached a historic high.

The data released by the US Department of Commerce on Tuesday showed that new home sales in the US in August fell significantly below expectations, reaching a five-month low. The latest data on new home sales indicates that high housing prices and high mortgage rates continue to dampen the momentum of the US housing market.

Specifically, the annualized new home sales in the US in August were 675,000 households, the lowest since March this year, with an expected value of 698,000 households. The revised value for July was raised to 714,000 households. New home sales in August fell by 8.7% MoM, the largest MoM decline since September 2022, with an expected decline of 2.2%. In July, it increased by 4.4% MoM. Compared with August last year, new home sales still rose by 5.8% YoY.

The median price of new homes sold in August was $430,300, a 2% decrease from August last year. The price of new homes is still much higher than before the COVID-19 pandemic.

As of the end of August, there were a total of 436,000 new homes for sale, the highest since February this year. Based on the current sales pace, it would take 7.8 months to consume the supply in the market.

In terms of regions, except for the Northeast, sales in other regions have declined.

The number of homes sold and awaiting construction in August has increased, which is an indicator of backlog.

Although the new home market accounts for only 10% of the US housing market and the monthly data fluctuates greatly, new home sales are calculated based on the data at the time of signing the purchase contract, which is different from the existing home sales that are counted after the contract is completed. Therefore, it is considered a leading indicator of the US housing market.

During the period covered by the August new home sales data, mortgage rates rose sharply. According to the Mortgage News Daily, as of the end of July, the average interest rate for a 30-year fixed-rate loan was 7.04%, and as of August 22, this number was 7.48%.

With the surge in mortgage rates, home builders have continued to take various measures to stimulate sales, including lowering home prices and reducing mortgage rates, in order to partially offset the pressure on buyers. In the past spring, when mortgage rates were below 7%, they temporarily slowed down related incentive measures, but recently they have intensified their efforts to stimulate sales.

One obvious feature of the US real estate market this year is that due to extremely limited inventory in the existing home market and various incentives provided by home builders for new home sales, buyers have turned to the new home market, and new home sales have been significantly stronger than existing home sales.

Analysts believe that home builders continue to benefit from extremely tight existing home supply, but this growth may eventually be offset by higher mortgage rates. According to the monthly survey by the National Association of Home Builders (NAHB), builder confidence in September fell into negative territory for the first time in seven months.

On the same day, the US also released an important house price index. The seasonally adjusted S&P/Case-Shiller National Home Price Index for July reached a new record high for the sixth consecutive month, with a MoM increase of 0.6% and a YoY increase of 1% in house prices. In contrast, the national housing price index in June remained unchanged compared to the same period last year, while it had decreased by 0.4% in May. As of the latest data in July, the housing price index has accumulated a 5.3% increase since the beginning of this year, offsetting the cumulative 5% decline in prices from the peak in June last year to the market slowdown period in January this year.

The data also shows that the S&P/CS 20-city composite home price index in the United States increased by 0.1% year-on-year in July, contrary to the expected 0.1% decrease, and a decrease of 1.17% in the previous month of June.

One notable feature of the current housing market in the United States is the significant regional differences. Chicago, Cleveland, and New York experienced the highest price increases among the 20 cities surveyed in July. Las Vegas and Phoenix performed the worst, with year-on-year declines of 7.2% and 6.6% respectively.

Another housing price data released on the same day, Tuesday, showed that the FHFA house price index in the United States increased by 0.8% month-on-month in July, exceeding the expected 0.4% increase, and the previous value was revised from 0.3% to 0.4%.

Overall, the limited supply has driven up housing prices. According to Realtor.com data, the number of homes for sale in August decreased by 7.9% compared to the same period last year. The continued demand from buyers exceeds the housing supply, putting upward pressure on prices.