New Home Sales Hit A 3-Year High In August As Builders Leaned On Incentives - Is The Market Showing Signs Of Life? Here's What You Need To Know

2025-10-17 11:43:50

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Sales of new single-family homes surged 20.5% month-over-month in August, hitting their highest level since January 2022.

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The jump was also the largest monthly gain in more than two years, according to census data, with sales up 15.4% compared with August 2024.

What makes this jump surprising is that buyers signed those contracts while mortgage rates hovered around 6.6% - higher than they are today. Rates dipped in September, when the Federal Reserve cut its lending rate.

The median price of a newly built home sold in August was $413,500, up 1.9% year over year.

Still, many builders are offering discounts and incentives to lure buyers.

In fact, 38% of builders reported cutting prices in October, which is close to the highest share since the pandemic, according to the National Association of Home Builders. [1]

“Meanwhile, the average price reduction rose to 6% in October after averaging 5% for several months previously. The last time builders reduced prices by 6% was a year ago in October 2024. The use of sales incentives was 65% in October, unchanged from September,” said the report.

Is the market revving up?

Analysts warn against reading too much into the numbers. Robert Dietz, chief economist at the National Association of Home Builders, said revisions could scale back the perceived August gain. The September new residential sales report will be out October 24.

“Always important to remember the margin of error for new home sales is large. We'll need to wait for revisions next month and the September data point to see if this is smoothed out,” Dietz told CNBC. [2]

Ivy Zelman of Zelman & Associates, a homebuilder analyst company, told CNBC the higher numbers were“directionally right, but the magnitude was way too high.”

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Zelman's own survey, which has a larger sample size than the U.S. Census data, showed a sales increase of just 6% year over year.

There's one likely reason for why sales are up despite high rates: homebuilders have leaned heavily on incentives, which may include covering closing costs or offering temporary mortgage rate buydowns.

“... I have to believe that the elevated level of home builder incentives was the main catalyst for the large upside surprise to new home sales,” wrote Peter Boockvar, chief investment officer of One Point BFG Wealth Partner, according to CNBC.“And we'll, of course, see the impact of lower mortgage rates when the September figure comes out, but keep in mind, if mortgage rates continue down... builders will then reduce the pace at which they are implementing incentives and thus possibly offsetting the benefit of lower mortgage rates for new homes.”

Incentives probably made new builds more attractive than existing homes, especially with inventory tightening. August supply fell to 7.4 months at the current sales rate from nine months in July, an 18% drop. Beyond potential incentives, new homes often come with energy-efficient features, modern layouts, and fewer immediate repair costs.

That said, they're still far from cheap, and new tariffs on imported lumber, timber, furniture and cabinets could raise prices even further. Nationwide, housing supply is falling while demand is sluggish, according to Redfin. [3] Builders themselves pulled back on new permits in August, according to the NAHB. [4]

However, it could be that homebuyers are simply waiting on the sidelines for rates to fall further.

“I think the magic number is 6%,” said Beth Behling, a Redfin real estate agent in Chicago.“Prospective homebuyers are paying attention to mortgage rates, and if they drop to 6%, I think we'll see a flood of interest.”

So what does all this mean for homebuyers?

How to know if now is a good time to buy

While real estate market trends are worth paying attention to, the real answer depends less on one month of sales data and more on your financial situation. Mortgage rates remain volatile, and the timing of future Federal Reserve cuts could shift affordability again. Lower rates might draw more buyers back into the market, which could actually drive prices up.

To decide if it's the right time for you, consider:

Monthly affordability: Run the numbers on what your payments would look like at current mortgage rates. If you'd be stretching beyond 30% of your income, it may be better to wait. The Fed is set to meet again in late October and it is expected to cut interest rates again.
The market in your area: Check inventory and pricing in your area and others - a hot spot with shrinking supply could mean higher prices down the line, while cooler markets may offer more negotiating room.
Your personal finances: A stable income, emergency savings, and long-term plans for the home matter more than short-term market swings.
Job and income stability: Lenders like steady income, and you'll feel more comfortable with your payments if your work situation is secure. With a softening job market, it might be difficult to afford a home if you lose your job.

August's numbers suggest buyers are finding ways to make deals work - but whether you should follow their lead depends on your finances, your timeline, and your tolerance for uncertainty in today's housing market. Experts recommend focusing on whether you can comfortably afford the payments today, rather than trying to time the market perfectly.