Sales of new US single-family homes surged to an eight-month high in August as buyers took advantage of price cuts and other incentives, but rising mortgage rates stemming from the war in the Middle East remain a drag on the housing market.
New home sales increased 6.4% to a seasonally adjusted annualized rate of 684,000 units last month, the highest level since December 2025, the Commerce Department’s Census Bureau said on Thursday.
Data for July was revised higher to show sales dropping to a rate of 643,000 units instead of the previously reported 607,000 units.
Economists polled by Reuters had forecast home sales would rise to a rate of 615,000 units.
New home sales are counted at the closing of a contract, making them the most timely data on housing demand, though they account for a small share of US home sales.
New home sales soared 84.9% in the Midwest and rose 6.9% in the South over the month, but they plunged 36.1% in the Northeast and by 15.2% in the West.
Sales decreased 2.0% on a year-over-year basis in August.
The US-Israeli war with Iran is driving up energy prices, boosting longer-term Treasury yields and mortgage rates.
The average rate on a 30-year fixed-rate mortgage has jumped nearly 100 basis points, or 1%, since the war started at the end of February.
It averaged 6.95% last week, the highest level since January 2025, data from mortgage finance firm Freddie Mac showed.
A National Association of Home Builders survey last week showed builders’ expectations of home sales over the next six months deteriorated considerably in September, prompting many to cut prices and offer incentives to lure buyers.
The median new house price dropped 5.8% to $393,700 in August from a year earlier, the Census report showed. Most of the homes sold in August were under $499,999.
Despite cutting prices, the inventory of unsold new homes remained large and could act as another constraint on builders’ ability to break ground on housing projects.
There is a shortage of previously owned houses, especially starter homes.
The supply of new houses on the market was unchanged at 483,000 units, with more than half of them under construction.
At August’s sales pace, it would take 8.5 months to clear the inventory, down from 9.0 months in July.