The shortage of homes for-sale continues to depress sales. Sales of newly built, single-family homes dropped last month and are now at the lowest level since last October, the Commerce Department reported Thursday. This follows on the heels of the National Association of REALTORS®’ report earlier this week that showed existing-home sales also dipped in July, reaching their sluggish pace in more than two years.

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“A lack of overall housing inventory is pushing up home prices, which is hurting affordability and causing prospective buyers to delay making a home purchase,” says Randy Noel, chairman of the National Association of Home Builders.

New-homes sales were at a 627,000 rate in July, about 1.7 percent lower than June sales. However, sales are now 7.2 percent higher than a year ago.

“Although this month marks the lowest sales pace since last October, we continue to see solid housing demand due to economic strengthening and positive demographic tailwinds,” says Danushka Nanayakkara-Skillington, NAHB’s senior economist. “Builders need to manage rising construction costs to keep their homes competitively priced for the newcomers to the housing market.”

The median price of new homes was $328,700 in July, which is 1.8 percent higher than a year ago.

Regionally, new-homes sales were up in the West (10.9 percent month-over-month) and the Midwest (up 9.9 percent month-over-month). However, those gains could not offset a 52.3 percent decline in the Northeast and a 3.3 percent drop in the South last month. “Year-to-date, sales in the Northeast are down 14.5 percent as the region deals with the impact from tax reform and persistent affordability issues,” NAHB notes in its release.

The slowdown in housing is getting the Federal Reserve’s attention, as reflected in the minutes of the central bank’s last meeting, which was released this week. Ward McCarthy, Jefferies LLC economist, noted:

“Housing activity in general has retreated from levels that were temporarily boosted by 2017 natural disasters—hurricanes and wildfires—that forced displaced households to seek alternative housing. The housing sector is also undergoing an adjustment to affordability that is less attractive than it was for most of the cycle, as well as changes in the treatment of SALT deductions in the federal tax code. That is the bad news. The good news is that there is no evidence of the type of imbalances that could cause a sharp downturn, such as heavy inventories and/or rising mortgage default and delinquency rates. We also note this is not the first temporary slowdown in housing activity this cycle.”

© National Association of REALTORS®