New Home Sales Sank 10.5% in July as Consumer Confidence Hit a 7-Month Low

Since new-home sales bottomed at 580,000 in May before a brief bounce to 678,000 in June, the July numbers released Tuesday, August 25 by the Census Bureau and HUD show that bounce was short-lived. Sales collapsed 10.5% to a seasonally adjusted annual rate of 607,000, the sharpest monthly drop and the weakest level since January, according to the joint Census Bureau/HUD report.

Economists had expected a softer decline to somewhere around 615,000 to 620,000, according to Crypto Briefing and Trading Economics. The actual number missed even the low end of that range. Year-over-year, sales are down 6.3% from July 2025's 648,000 pace.

Blame the mortgage rate. The 30-year fixed averaged roughly 6.54% in July, up from 6.49% in June, according to Crypto Briefing. NPR's Scott Horsley reported existing-home buyers are now facing rates near 6.7%, the highest in a year, after briefly dipping below 6% earlier in the year. That dip sparked hope for a rebound. Then, according to NPR, the war with Iran triggered an inflation spike and mortgage rates started climbing back up.

The regional wipeout: Midwest down 43%

The pain wasn't evenly spread. Trading Economics reported sales plummeted 43% in the Midwest to just 43,000 units and fell 13% in the South to 383,000. The Northeast and West gained, up 30% and 6.2% respectively, but those regions are smaller markets and couldn't offset the Midwest and South collapse.

Inventory kept piling up while sales fell. New homes available for sale hit 488,000 units at the end of July, a 1.9% increase from June, according to Brisk Markets. At the current sales pace, that's 9.6 months of supply, up from 8.5 months in June. A balanced market runs around six months. This is not a balanced market.

Prices told a split story. The median new-home price dropped to $393,800, down 2.3% from June and the lowest level in over a year, according to continuumeconomics. That's the second straight monthly decline and third straight year-over-year decline. But the average price jumped 4.1% to $508,800, up 5.4% year-over-year. Continuum Economics noted that gap between median and average reflects a shift toward higher-end product getting built and sold, while cheaper starter homes struggle to move.

Consumer confidence: expectations crater, present situation improves

The same day the housing numbers dropped, The Conference Board reported consumer confidence fell to 89.4 in August from a revised 90.2 in July, the lowest since January, according to ZeroHedge and continuumeconomics. Dana Peterson, chief economist at The Conference Board, said confidence "moderated slightly" for a second straight month.

The internals were split. The Expectations Index sank to January lows, according to ZeroHedge, while the Present Situation Index jumped 6.8 points to 121.2 after three consecutive declines, according to continuumeconomics. Peterson said perceptions of the current labor market improved, reversing three months of decline, but consumers turned more pessimistic about business conditions and jobs over the next six months.

By political affiliation, ZeroHedge reported confidence among independents and Republicans softened in August while Democrats grew somewhat more positive. Consumers' written comments referenced war and conflict, groceries, trade, and jobs more often in August, and 61.3% of consumers still expect higher interest rates over the next year.

Retail spending shows strain

Retail sales fell 0.6% in July, the steepest monthly drop since May 2025, according to the Commerce Department figures reported by CNN. A separate University of Michigan survey showed consumer sentiment falling roughly 8% to a preliminary reading of 51 in early August, ending a two-month streak of improving sentiment.

Heather Long, chief economist at Navy Federal Credit Union, said American consumers are "showing signs of fatigue." Joanne Hsu, the Michigan survey's director, said there's a "pervasive belief that high prices will continue to be burdensome," according to CNN.

Online sales fell 2.2% in July, the largest drop of any category, and car dealership sales fell 2%, CNN reported. Restaurant and bar spending rose 0.5%. CNN noted some of the July retail pullback reflects timing: Amazon Prime Day, Walmart+ and Target Circle promotions landed in June this year, pulling spending forward.

The two-speed housing market

NPR's Scott Horsley reported a split market: overall sales stuck in a slump, but homes priced at $1 million or more selling briskly. Nashville realtor Jack Gaughan told NPR those buyers have often already sold another property or are otherwise flush with cash and don't have to worry about financing costs the way first-time buyers do.

Charlie Dougherty, senior economist at Wells Fargo, told NPR the housing market is "still on the mat, pinned down by really challenging affordability conditions," compounded by a softening job market that isn't keeping pace with home prices. First-time buyers' share of purchases shrank in July, according to NPR.

A National Association of Realtors survey found few agents expect meaningful improvement in buyer or seller activity over the next three months, NPR reported. The next new-home sales report is scheduled for September 24. Whether the Federal Reserve moves on rates before then, and whether builders keep discounting to clear that swelling 9.6-month inventory, will decide if July was a blip or the start of a longer slide.