Single-Family Home Sales Experience Slight Uptick in June

New single-family home sales in the United States managed to reverse a two-month downward trend in June. However, the ongoing rise in mortgage rates and home prices is still keeping many potential buyers sidelined.

Sales of new homes increased by 1.6%, reaching 628,000 units on a seasonally adjusted annual basis, according to a report from the Commerce Department’s Census Bureau released on Friday. This figure came from an upward revision of May’s numbers.

It’s worth noting that new home sales—counted at closing—constitute a small fraction of overall U.S. home sales, and they can vary quite a bit from month to month. In June, home prices were down 5.6% compared to the same month last year.

Analysts surveyed by Reuters had anticipated sales to reach 610,000 units.

The median price of new homes in June stood at $398,300, which is a decrease of 2.7% from June of the previous year.

Rising borrowing costs are presenting a significant challenge for the housing market, which remains relatively weak.

Last week, average interest rates for 30-year fixed mortgages—popular among U.S. buyers—hit their highest mark since last August. This situation shows little sign of improving anytime soon, fueled by inflation concerns voiced by Federal Reserve officials and prevailing trends in the bond market.

This week, Freddie Mac reported that the average 30-year mortgage rate rose to 6.58%. Meanwhile, the Mortgage Bankers Association noted that the rate for this mortgage type had reached 6.69% for the week ending July 17, marking the highest levels in almost a year.

To give a bit of context, mortgage rates have increased by around 0.60 percentage points since the onset of conflicts involving the U.S. and Israel against Iran in late February, which consequently boosted global oil prices and contributed to widespread inflation.

As for economic indicators, the measure the Federal Reserve uses to gauge its 2% inflation target suggests that prices are climbing at roughly twice that pace. The bond market seems to anticipate that the Fed will take action soon, potentially raising interest rates.

The Fed is set to meet next week, and while futures markets are currently speculating about a one-in-three chance of a rate hike at that gathering, the likelihood shoots up to almost certainty for the meeting scheduled in September.

As for the bond market, it’s already responding: the yield on the 10-year U.S. Treasury note, which serves as the benchmark for setting mortgage rates, has risen by a quarter of a point this month, nearing an 18-month high.