Sales of new single-family homes fell 10.5% in July to a seasonally adjusted annual rate of 607,000, the steepest one-month drop since January and a fresh sign that this year's climb in mortgage rates is catching up with the housing market, the Commerce Department reported Wednesday.
The pace also ran 6.3% below July 2025's rate of 648,000, according to the joint report from the Census Bureau and the Department of Housing and Urban Development. Buyers who did close deals paid less for the privilege: the median new-home price slipped to $393,800, down 2.3% from June and the lowest level in five years.
Rates squeeze affordability
The retreat tracks a steady run-up in borrowing costs. Mortgage rates climbed from roughly 6.1% in January to above 6.6% by July, according to figures cited by the National Association of Home Builders, eroding the monthly-payment math for prospective buyers even as builders lean harder on discounts to keep contracts moving.
Elevated borrowing costs, rising inflation and broad economic uncertainty continue to curb buyer demand.
Robert Dietz, chief economist, National Association of Home Builders
Builders have responded by cutting list prices and sweetening incentives rather than trimming production outright. NAHB survey data cited in the report found 37% of builders cut prices in July, by an average of 6%, while 63% used incentives such as mortgage-rate buydowns or covered closing costs. Those concessions have not cleared the growing backlog: unsold inventory rose to 488,000 homes, a 9.6-month supply at the current sales pace and the highest reading since January.
The slowdown was not uniform. Year-to-date, sales in the Northeast are up 8.8%, while the Midwest and West are each down 6.4% and the South has slipped 3.7%. One bright spot: homes priced above $800,000 grew their share of new-home sales from 5% to 8%, a sign move-up and cash buyers are proving more resilient to rate pressure than entry-level shoppers.
NAHB now expects single-family construction to post a second consecutive annual decline in 2026, a stretch of weakness that HousingWire reports is prompting builders to slow land purchases and starts heading into the fall selling season. For the Federal Reserve, the data add to a mixed picture as officials weigh whether cooling in one of the economy's most rate-sensitive sectors is broad enough to support a further rate cut later this year.
