U.S. New Home Sales Miss Expectations: ETFs in Focus

Core Insights - Sales of new U.S. single-family homes increased by 0.6% in June to an annual rate of 627,000 units, falling short of expectations of 650,000 units [1] - Year-over-year, new home sales declined by 6.6% compared to June 2024, indicating ongoing challenges in the housing sector [2] - The inventory of unsold new homes reached 511,000 units, the highest since October 2007, leading to downward pressure on prices [6][7] Sales Performance - June sales rose to a seasonally adjusted annual rate of 627,000 units, a slight increase from May's unchanged figure of 623,000 units [1][2] - The annual decline of 6.6% in new home sales reflects persistent difficulties in the housing market [2] Mortgage Rates Impact - Elevated mortgage rates, with the 30-year fixed-rate mortgage remaining just below 7%, continue to hinder housing market activity [3] - The Federal Reserve's decision to pause rate cuts amid inflation concerns contributes to the high mortgage rates [3][4] Construction and Permits - New housing construction has slowed, with single-family homebuilding in June dropping to an 11-month low and permits for future construction at their lowest in over two years [5] Inventory and Pricing - The unsold inventory of new homes increased to 511,000 units, indicating a supply surplus that would take 9.8 months to deplete at the current sales pace [6] - The median price of a new home fell by 2.9% year-over-year to $401,800 in June, with builders increasingly cutting prices to attract buyers [7] Investment Focus - Homebuilding ETFs such as iShares US Home Construction ETF (ITB) and SPDR S&P Homebuilders ETF (XHB) are recommended for close tracking in light of current market conditions [8]