The Commerce Department and Department of Housing and Urban Development reported on Wednesday that a seasonally adjusted 714,000 new houses were sold during July at a median price of $436,700.

There were 437,000 new homes listed for sale at the end of July, representing a supply of 7.3 months at current sales rates — well above the 3.3-month supply of existing homes reported by the National Association of Realtors this week.

The National Association of Home Builders trade group said that low inventory of existing homes available for sale helped offset rising mortgage rates and elevated construction costs to give new-home sales a boost. Lack of existing-home supply, affordability challenges and high interest rates have kept apartment renters and other prospective buyers on the sidelines. 

“New home sales were solid in July because of an ongoing housing deficit in the U.S. and a lack of resales stemming from many homeowners electing to stay put to preserve their low mortgage rates,” NAHB Chairman Alicia Huey said in a statement. The NAR this week reported July’s sales of existing U.S. homes dropped 2.2% for the month and declined 16.6% for the year.

Oxford Economics lead U.S. economist Nancy Vanden Houten said July’s new home sales were “a touch stronger than expected,” increasing to their strongest pace since February 2022. “We expect new home sales to come under pressure in the months ahead as labor markets soften and homebuying affordability worsens after the latest spike in mortgage rates to a 22-year high,” the economist said in a statement Wednesday.

Rising interest rates sent mortgage applications for new home purchases to their lowest level since April 1995, as overall application volume dropped 4.2% for the week that ended Aug. 18 from the prior week.

The Mortgage Bankers Association said purchase applications declined 5% from the prior week and were down 30% from the comparable week of 2022. Refinance applications dropped 3% for the week and fell 35% for the year.

MBA Deputy Chief Economist Joel Kan said the slowdown came as the trade group’s latest national lender survey showed 30-year, fixed-rate mortgages averaging 7.31%, the highest level since December 2000.

Kan said high rates are repelling prospective homebuyers by eroding their purchasing power, and low housing supply is keeping prices high in many regions, adding to affordability hurdles.