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

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Sales of new U.S. single-family homes rose marginally in June, as elevated mortgage rates continued to dampen housing market activity. According to data released Thursday by the Commerce Department’s Census Bureau, sales increased by just 0.6% to a seasonally adjusted annual rate of 627,000 units, falling short of economists' expectations for 650,000 units, as polled by Reuters.

May Sales Unchanged, Year-Over-Year Decline Noted

The sales pace for May remained unrevised at 623,000 units. On an annual basis, new home sales declined 6.6% compared to June 2024. These figures indicate ongoing challenges in the housing sector, particularly for new home sales, which make up about 10% of total U.S. home sales.

High Mortgage Rates: Key Deterrents

Mortgage rates remain a significant headwind for the housing market. The 30-year fixed-rate mortgage has remained just below 7% for much of 2025. This comes amid the Federal Reserve’s decision to pause rate cuts, reflecting inflation concerns tied in part to President Donald Trump's protectionist trade policies.

Although the Fed cut interest rates three times in 2024, the last reduction occurred in December. The central bank is widely expected to maintain the benchmark interest rate in the 4.25-4.50% range during its upcoming policy meeting.

Homebuilding and Permits Signal Weakness

New housing construction has also slowed. Government data released last week showed that single-family homebuilding in June dropped to an 11-month low, while permits for future construction fell to their lowest level in over two years.

Inventory Hits 17-Year High, Price Pressures Build

The inventory of unsold new homes climbed to 511,000 units, the highest level since October 2007, up from 505,000 in May. At the current sales pace, it would take 9.8 months to exhaust the available inventory—up slightly from 9.7 months in the prior month.

This growing inventory is placing downward pressure on prices. The median price of a new home fell 2.9% year-over-year to $401,800 in June. Meanwhile, a National Association of Home Builders survey found that the share of builders cutting prices to lure buyers rose in July to the highest level since 2022.

ETFs in Focus

Against this backdrop, homebuilding ETFs like iShares US Home Construction ETF (ITB - Free Report) and SPDR S&P Homebuilders ETF (XHB - Free Report) should be closely tracked.


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iShares U.S. Home Construction ETF (ITB) - free report >>

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