New-Home Sales Surge in August as Builders Boost Incentives and Cut Prices

Sales of newly built homes surged to a three-year high in August as homebuilders boosted their use of buyer incentives, breathing life into a sluggish summer housing market.

Signed contracts for new single-family homes were at a seasonally adjusted annual rate of 800,000 last month, up 21% from July and 15% higher than a year ago, the U.S. Census Bureau and Department of Housing and Urban Development reported Thursday.

The August figure was far above what economists had expected and the highest since January 2022, potentially signaling a resurgence for homebuilders, who have struggled in the face of weak demand and elevated interest rates.

Last month's sales gains were broad-based, with sales rising 72% in the Northeast, 13% in the Midwest, 25% in the South, and 5.6% in the West compared to July.

Meanwhile, prices ticked higher last month, with the median sales price for new homes hitting $413,500, up 1.9% from July and 4.7% higher than a year earlier.

Surprisingly, the surge in August sales came before mortgage rates dropped below 6.4% in recent weeks, with 30-year fixed rates averaging 6.59% last month, according to Freddie Mac.

However, in the face of weak demand from buyers, homebuilders have been aggressively buying down mortgage rates and offering other incentives to homebuyers.

As well, prices for new homes have fallen below those of existing homes in recent months, inverting a longstanding trend and potentially making new builds more attractive to affordability-strapped buyers.

In September, 39% of builders reported cutting prices, up from 37% the prior month and the highest percentage in more than five years, according to the National Association of Home Builders (NAHB)/Wells Fargo Housing Market Index.

"Builders remain more willing than individual sellers to adjust prices, but even with these concessions, the market is still gauging how much demand can be coaxed back," says Realtor.com® Senior Economist Anthony Smith.

The use of sales incentives such as rate buydowns and closing cost assistance also remains high, with 65% of builders saying they used incentives this month, little changed from 66% in August.

"Another reason the New Home sector got a bump could be the trend toward the construction of smaller homes. With more people wanting to downsize, smaller homes are becoming more attractive," says BrightMLS Chief Economist Lisa Sturtevant.

New-home supply falls as builders slow construction

The supply of new houses for sale at the end of August was 490,000 on a seasonally adjusted basis, down 1.4% from July.

At the current sales pace, it represented 7.4 months of supply on the market, a sharp reduction from 9 months in July, and down from 8.2 months a year ago.

"The supply of new homes tightened notably as buyers stepped back into the market," says Smith, who noted that the market for new homes is "still a well-supplied market, but less so than earlier in the summer."

Homebuilders, battered by elevated interest rates and struggling to find buyers, have pulled back sharply on new-home construction this year.

In the first half of 2025, construction starts on single-family homes dropped 5.8% from a year earlier, while single-family permits dropped 5.1%, according to Census data.

As a result, the total supply of new homes for sale has been falling since May, when it matched an 18-year high of 504,000.

"Builders enter autumn with a leaner stock of unsold homes and a healthier sales pace, but they remain mindful of affordability constraints despite some easing in mortgage rates," says Smith. "Maintaining balance, by starting enough homes to meet demand without overcommitting, will be key as they plan new projects for late 2025 and early 2026."