New Home Sales Tumble, Consumer Outlook Deteriorates — Evening Brief – 08.25.26
U.S. new home sales fell sharply in July as elevated borrowing costs and affordability pressures continued to restrain housing demand, while separate reports showed consumers becoming more pessimistic about the economic outlook and Mid-Atlantic manufacturing growth slowing.
Sales of newly built single-family homes declined 10.5% from June to a seasonally adjusted annual rate of 607,000, below the 620,000 consensus estimate, according to the Census Bureau. June sales were revised sharply higher to 678,000 from 628,000.
July sales were 6.3% below their year-earlier pace.
Inventory rose 1.9% to 488,000 homes, representing 9.6 months of supply at the current sales rate. A rising months’ supply can give buyers greater leverage, although July’s increase partly reflected the slower sales pace.
The median new home price declined 2.3% from June and 0.9% from a year earlier to $393,800, suggesting builders remain under pressure to address affordability through price reductions and incentives.
Consumer confidence also weakened in August. The Conference Board’s index fell to a seven-month low of 89.4 from a revised 90.2 in July, missing expectations.
The Present Situation Index rose to 121.2 after three consecutive declines, aided by improved assessments of job availability. The labor-market differential increased 4.8 percentage points to 7.5%.
However, the Expectations Index dropped 5.8 points to 68.2, remaining below the 80 level historically associated with recession concerns. Consumers anticipated inflation rising to 5.8% over the next year from 5.6%, according to Reuters.
“Consumers were more pessimistic about business conditions and the labor market over the next six months,” Conference Board Chief Economist Dana Peterson said.
The Richmond Fed’s manufacturing index slipped to 4 from 5. Shipments improved to 11, but new orders eased to 3 and employment turned negative at minus 2, indicating modest regional expansion with uneven underlying momentum.