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The housing market is seeing a fresh burst of activity as mortgage rates edge lower.
That's evident from the wave of buyers who are diving into the market for new homes after being sidelined by waning affordability in recent years.
New home sales climbed nearly 15% in August, according to data from the Mortgage Bankers Association. That's the sharpest jump in new home sales since February 2022.
Applications for new home purchases, meanwhile, grew 4.4% year-over-year in August. According to the MBA's latest builder application survey, August was the 19th consecutive month that applications have increased.
"Homebuyers, including a growing share of first-time buyers, continue to favor newly built homes, as declining mortgage rates in August contributed to the uptick in new home sales activity," Joel Kan, MBA's vice president and deputy chief economist, said in a statement.
The decline in mortgage rates has granted buyers some relief and handed them a bit of extra purchasing power. The 30-year fixed rate mortgage inched lower to 6.2% last week, according to Freddie Mac data, nearly a full percentage point lower than the rate at this time last year.
New homes have become more sought after than existing homes, as many existing homeowners cling to lower mortgage rates and opt not to sell. Existing home sales slumped 2% year-over-year in July, marking the slowest pace of sales ever recorded for that month, Redfin found.
Most housing forecasters expect a slow rebound in home sales over the coming years as the 30-year fixed mortgage rate continues to edge lower. Nearly 90% of existing homeowners have a mortgage have an interest rate below 6%, according to a Redfin survey conducted at the start of the year. The real estate firm, meanwhile, anticipates the 30-year fixed rate to remain above 6% by the end of 2024.
