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A surprise rebound in the housing market

The housing market threw everyone a curveball in August. Despite mortgage rates hanging around levels that usually scare off buyers, sales of newly built homes shot up 20.5% compared with July, according to fresh data from the U.S. Census. That makes August the strongest month since January 2022 and the biggest one-month jump since last summer.

Even more surprising? Sales were up 15.4% compared with August 2024. If you’ve been following the housing market lately, you’d know that kind of growth doesn’t happen every day—especially when financing a home has been more expensive than at any time in the last two decades.

Mortgage rates weren’t doing buyers any favors

In August, the average 30-year fixed mortgage rate hovered around 6.63%, according to Mortgage News Daily. That’s higher than where rates sit today and definitely not the kind of number that typically encourages people to rush into a purchase. The real dip in rates didn’t come until September, when they briefly hit 6.13% before bouncing back up again.

So why did buyers make moves before rates dropped? That’s where things get interesting.

Incentives may have sweetened the deal

Homebuilders have been working overtime to keep sales alive in a tough environment. Think of discounts, rate buydowns, and even freebies like upgraded finishes. According to the National Association of Home Builders (NAHB), 39% of builders reported cutting prices in September—up from 37% in August and the highest level since the pandemic.

Peter Boockvar, chief investment officer at One Point BFG Wealth Partners, summed it up nicely: “I have to believe that the elevated level of home builder incentives was the main catalyst for the large upside surprise.” Translation? Builders dangled enough carrots in front of buyers to get them to sign contracts, even with higher borrowing costs.

But experts are still scratching their heads

Not everyone is convinced this surge tells the full story. Robert Dietz, chief economist at the NAHB, cautioned that the Census survey comes with a wide margin of error. “We were expecting a gain but not that large,” he said, adding that September’s revisions will give a clearer picture.

Ivy Zelman of Zelman & Associates went a step further, saying the number was “directionally right, but the magnitude was way too high.” Her own survey, which covers a larger share of homebuilders, showed sales up just 6% year over year—not 20%.

In other words, the reality may not be as dramatic as the headline figures suggest.

Price tags aren’t coming down

Another twist? Despite all the talk of price cuts, the median price of a new home in August actually rose to $413,500—a 1.9% increase from last year. That’s not the kind of drop buyers dream of, though builders argue that incentives like lower upfront costs matter more than the sticker price itself.

Regionally, sales were strongest in the Northeast and South. In the West—where prices are highest—growth was slower, showing just how much affordability still matters.

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What it means moving forward

For now, strong August sales have pulled down inventory from a nine-month supply in July to just 7.4 months—a nearly 18% drop. That could create tighter conditions if demand keeps up. But interestingly, builders seem cautious: single-family housing starts and permits both slowed in August compared with last year. It’s almost as if they didn’t see this wave of buyers coming.

The big question is what happens next. If mortgage rates keep drifting lower, demand could climb even higher. But as Boockvar warned, builders may pull back on incentives if cheaper financing makes homes easier to sell. That could offset the savings buyers were hoping for.