The price drop combined with developer incentives stimulates the unexpected surge in new home sales in the United States in July.

In July, new home sales in the United States exceeded market expectations, with the previous figures also being revised upwards, indicating that demand for home purchases has been boosted by price declines and large-scale incentives. Data released by the US Department of Commerce on Monday showed that the annualized rate of new single-family home contracts in July was 652,000 units, higher than the economist forecast of 630,000 units. The report pointed out that demand was strongest in the Western region, while the Southern and Midwest regions saw a decline. Despite the data exceeding expectations, the dependence of the new home market on price cuts and incentives is deepening. The report shows that 66% of homebuilders took promotional incentives this month, the highest proportion since the start of the pandemic, amid high mortgage rates. These incentives are mainly to reduce inventory, which has reached the highest level since 2009. Stephen Stanley, Chief Economist at Santander Capital Markets, stated, "The slowdown in construction activity is beginning to have some effect, with a slight decrease in the inventory of new homes under construction. However, unless the number of completed new homes decreases significantly, developers will still consider reducing construction as a priority task." The Bloomberg Economics research team said that homebuilders are facing inventory pressure, with the proportion of completed homes continuing to rise. Coupled with high mortgage rates, the housing market activity and prices are expected to remain under pressure in the coming months. D.R. Horton, Inc. (DHI.US), representing entry-level builders, said in its latest earnings conference call that the company is helping some buyers lower their mortgage rates to 3.99% through substantial subsidies. At the same time, more and more homebuyers are choosing loans backed by the Federal Housing Administration (FHA), which typically accept customers with lower credit scores. In terms of prices, the median sales price of new single-family homes in July fell by nearly 6% year-on-year, to $403,800, the lowest level for July since 2021. Except for one month, new home prices have been declining continuously this year. In addition, new home sales prices have been lower than existing home median prices for four consecutive months. In terms of regional performance, new home sales in the West increased by 11.7% month-on-month, while the South and Midwest recorded declines. As new home sales are based on contracts, they are more timely than transfer data for existing homes, but they have greater monthly fluctuations. Official data shows that there is a 90% confidence interval for the change in new home sales, ranging between a 16.1% decrease and a 14.9% increase. Despite the decline in prices, inventory pressure still exists. The report shows that the inventory of new homes for sale in July (including those not yet started and under construction) slightly decreased to 499,000 units, but it is still close to the highest level since 2007.