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ew home sales surged in July, increasing by a significant 10.6% compared to June and a modest 5.6% year-over-year, according to data from the U.S. Census Bureau. This growth was largely driven by a drop in mortgage rates, which builders capitalized on by offering attractive incentives to potential buyers.

    The National Association of Home Builders reported that builders used incentives at a rate of 64% in July, the highest level since April 2019. Despite this, the median price for new homes sold during this period was $429,800, which was higher than in May and June but lower than the peak in March of $436,400.

    Regionally, the Midwest saw the largest increase in new home sales year-over-year at 22.1%, followed by the West (up 6.1%) and the Northeast (up 5.4%). However, new home sales in the South decreased by 2.4%.

    While new home sales represent a small portion of the overall housing market, they intersect with existing home sales. If existing home inventory continues to rise, it could impact the new home segment of the market, according to Lisa Sturtevant, chief economist at Bright MLS.

    The Federal Reserve's potential interest rate cuts could also impact new home sales. Molly Boesel, principal economist at CoreLogic, believes there is a large pool of buyers waiting for the Fed to act. She predicts that once the Fed begins cutting interest rates, which could start as early as next month, sales will gradually increase.

    In conclusion, while new home sales have seen a significant increase in July, builders need to continue to offer incentives to compete in the market. The Federal Reserve's interest rate cuts could further stimulate demand for new homes, leading to a potential increase in sales in the coming months.