US new home sales plunged 10.5% in July to 607,000, as elevated mortgage rates and stretched affordability put renewed pressure on homebuyer demand.
US new home sales plunged in July as elevated mortgage rates and historically stretched affordability continued to weigh on prospective homebuyers.
New home sales fell 10.5 per cent month-on-month to an annualised 607,000 units, sharply missing market expectations for a 1.4 per cent decline. The July reading was the lowest in six months and, excluding January 2026, marked the weakest level since November 2022.
The latest data add to growing signs of weakness in the US housing market. New home sales have now declined in three of the past four months and are down 6.3% from a year earlier, pointing to a sustained slowdown in demand rather than a one-month setback.
The weakness was particularly pronounced in the Midwest, where new home sales collapsed 42.7 per cent month-on-month to 43,000 units. That was the region’s weakest reading since 2012.
The South, which accounts for more than 60 per cent of US new home sales and is the country’s largest homebuying region, also recorded a sharp decline. Sales fell 13 per cent to 383,000 units, putting them at the second-lowest level since January.
Mortgage rates add to affordability pressures
More from BusinessThe housing slowdown comes as borrowing costs remain elevated. The 30-year mortgage rate climbed to 6.81 per cent, its highest level since August 2025, increasing the cost of financing for potential buyers.
Higher mortgage rates have compounded an affordability problem that has persisted across the US housing market. Elevated home prices, limited affordability and expensive borrowing costs are making it increasingly difficult for households to enter the market.
The July decline suggests that would-be buyers remain highly sensitive to financing costs. Even as some homeowners and builders offer incentives to attract buyers, elevated mortgage rates can keep monthly payments out of reach for many households.
The sharp drop in sales also raises questions about the broader outlook for residential construction and the US economy. New home sales are closely watched because they can influence future construction activity, employment and demand for housing-related goods and services.
For now, the combination of high mortgage rates, expensive homes and weakening sales points to continued pressure on the US housing market. Unless borrowing costs ease materially or affordability improves, demand for new homes could remain subdued in the months ahead.
