New-Home Sales Rose Sharply in July

As listings of previously owned homes dry up amid unfavorable market conditions for prospective home sellers, an increasing number of buyers are turning to new construction. New-home sales rose 4.4% to an annual rate of 714,000 in July, up from a revised 684,000 the month prior, Realtor.com reports.

Not only are home builders offering more inventory than existing home sellers, but in some cases, they’re also enticing buyers with incentives such as price cuts and mortgage rate buydowns to make new-home purchases more affordable.

Publicly listed home builders have reported an increase in profits as the housing market grapples with an imbalance between buyer demand and low supply of homes. Toll Brothers, which reported its third-quarter earnings on Tuesday, exceeded Wall Street expectations with its results.

“Our third quarter performance reflects a market for new homes that continues to benefit from historically low levels of resale inventory, favorable long-term demographic trends, and the persistent underproduction of homes for well over a decade,” Douglas C. Yearley, Jr., chairman and chief executive officer of Toll Brothers, said in a statement.

“Given the ability of builders to buy rates down for prospective borrowers, if you are looking to buy, the new market is the best option,” Neil Dutta, head of economics at Renaissance Macro Research, wrote in a note. “One thing to monitor will be the extent to which higher rates might be pushing up cancellations.”

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