A tale of two housing markets
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New home sales climbed again in July, continuing to outpace the existing home market.
Why it matters: The tale of two housing markets shows how surging mortgage rates have gridlocked the market for already-built homes.
The latest: Sales of newly built homes rose to an annualized pace of 714,000 in July, better than analysts had expected.
- In fact, it was the fastest pace of growth for new homes since February 2022.
- The numbers, released on Wednesday, came a day after existing home sales posted yet another sharper-than-expected decline in July.
Zoom in: Most existing homeowners are benefiting from the far lower mortgage rates they locked in when they first bought (or refinanced).
- They're not thrilled with the idea of trying to move now, which would mean selling and getting a new mortgage, just as rates are at the highest level in decades.
- So they're staying put — which means far fewer homes on the market.
- As a result, would-be home buyers — especially first-time buyers who aren't benefiting from low rates locked in long ago — are increasingly looking to inventories of new homes.
The impact: First-time home buyers now make up roughly 50% of all purchasers, according to Zillow. Two years ago, that figure was 37%.
The bottom line: While new home sales are growing much faster than existing homes, the latter makes up over 80% of the market. So even if some buyers move into newly built homes, there's not enough to ease what is quickly turning into a housing affordability crisis.
