New home sales improved in August, but the monthly gain masked continued weakness in the broader new-home market. Elevated mortgage rates and ongoing affordability challenges continue to constrain demand, with new home sales remaining below last year’s pace and year-to-date sales lower than in 2025.

Despite the monthly increase, housing affordability remains a significant challenge for prospective buyers. The average 30-year fixed mortgage rate reached 6.95% in mid-September, its highest level since January 2025, according to Freddie Mac.

Sales of newly built single-family homes increased 6.4% in August to a seasonally adjusted annual rate of 684,000, following an upwardly revised July estimate, according to the U.S. Department of Housing and Urban Development and the U.S. Census Bureau. This represented a 2.0% decline from a year earlier. A new home sale is recorded when a contract is signed, or a deposit is accepted, regardless of the stage of construction. The seasonally adjusted annual rate reflects the pace of sales that would occur over a 12-month period if current conditions persist.

New single-family home inventory in August was unchanged from July at 483,000 units but fell 2.0% from a year ago. At the current sales pace, the months’ supply of new homes stood at an elevated 8.5 months, about the same level as a year ago. A five- to six-month inventory level generally indicates a balanced market.

Combined new and existing home inventory has edged higher in recent months, with the total months’ supply reaching 5.3 months. Inventory conditions in the existing home market have gradually improved in recent months. Moderating prices across both markets have helped support buyer demand amid ongoing affordability concerns.

At the end of August, there were 112,000 completed, ready-to-occupy homes available for sale on a non-seasonally adjusted basis. Completed homes accounted for approximately one-quarter of total inventory, while homes under construction made up 54%. The remaining share of homes sold in August had not yet started construction at the time the sales contract was signed.

Home prices remained relatively stable despite the slowdown in sales activity, reflecting incentives provided by builders. The median new home sale price was $393,700, up 0.4% from July but down 5.8% compared to a year ago. Homes priced between $300,000 and $499,999 accounted for half of all new home sales, while 22% of sales were priced below $300,000, underscoring ongoing affordability challenges for entry-level buyers. The remaining 26% of sales were priced above $500,000. It is worth noting that the share of homes priced below $300,000 has increased in recent months, while the share priced over $500,000 has decreased.

Regional performance was mixed in August. The Midwest posted the strongest monthly gain in sales, rising 84.9% from July, followed by the South, which was up 6.9%. In contrast, sales declined in both the Northeast and West, with the Northeast experiencing the sharpest drop, falling 36.1% from the previous month. The West was down 15.2%.

Compared with August 2025, the Midwest and the South recorded year-over-year gains, with sales increasing 22.5% in the Midwest and 3.4% in the South. Sales declined 20.7% in the Northeast and 26.8% in the West.

On a year-to-date basis, regional trends were similarly uneven. New home sales were unchanged in the Northeast. Meanwhile, sales were down 0.6% in the Midwest, 1.0% in the South, and 10.0% in the West.