On Thursday, new home sales climbed to an eight-month high, demonstrating resilience in the sales channel that has persisted since the market downturn in 2022. However, when excluding the spike in new home sales during the COVID era, we find ourselves stagnant for a decade.
To put this into context, current new home sales are aligning with levels seen in 2019. This could translate to over a million additional existing home sales if that market were following 2019 trends. The underlying issue is clear: the new home sales sector is operating in an environment with mortgage rates below 6%, whereas the existing home sales market is unable to do the same.
Now, let’s examine the details from today’s report.
New Home Sales
According to estimates released today by the U.S. Census Bureau and the Department of Housing and Urban Development, new single-family home sales in August 2026 were at a seasonally adjusted annual rate of 684,000. This marks a 6.4% (±19.5%)* increase from the July 2026 rate of 643,000, although it is down 2.0% (±15.7%)* from the August 2025 figure of 698,000.
The accompanying chart illustrates a consistent back-and-forth movement over the years, with sales hovering around 2019 levels. Builders have managed to mitigate the impact of rising borrowing costs by leveraging mortgage-rate buydowns. The critical question now is whether, amidst increasing rates, they can maintain enough profit margins to prevent new home sales from dipping below the lows of 2022. As of now, the market is holding steady, with sales reaching an eight-month peak.
For additional context, if existing home sales had been functioning in a sub-6% mortgage rate environment, today’s data would look quite different. We have shown that sales can increase if rates approach 6%. However, historical trends suggest that with current Fed policies, rates are unlikely to fall below 5.75% in a neutral policy environment at 3%. We are currently witnessing another rise in rates.
Positive Supply Outlook
On a more positive note for housing construction, the data on total units completed-for-sale indicates we won’t see a housing construction surge as long as this figure stays at 120,000 or higher, since builders are unlikely to issue more permits in that scenario. Currently, things are trending in the right direction. However, with recent rate increases and declining profit margins, the future remains uncertain.
The mortgage rate environment has shifted dramatically over the past month, with rates peaking today at 7.37%. This presents a challenging backdrop as profit margins contract, as reflected in builder confidence data.
For now, the stability in the new home sales channel since 2022 can be attributed to builders using their profit margins to buy down mortgage rates. This strategy is not sustainable indefinitely, but for the time being, it has prevented the situation from deteriorating further.
