Zillow reported that new home sales moved higher in June at a seasonally adjusted annual rate of 628,000 — up 1.6% from May. That’s still 5.6% below their pace a year-ago, though.
And, according to Zillow, when you look beyond the single month, a pattern has emerged.
Through the first half of 2026, builders have sold fewer new homes than in any comparable stretch since 2017, Zillow noted. The year-to-date pace is running below every year from 2018 through 2025, the brokerage said.
The number of single-family completions is up on a year-over-year basis, but the decline in sales has kept the stock of new homes for sale near its highest levels in more than a decade, Zillow said.
At the current sales pace, it would take about nine and a half months to clear it.
Weak Household Formation
Zillow Senior Economist Orphe Divounguy said that weak household formation is at the root of the slowdown.
Higher mortgage rates, softer hiring, and sticky inflation are discouraging the household formation that ultimately drives home sales, Divounguy said. More young adults and would-be first-time buyers are staying put, doubling up, or sharing a home rather than heading out on their own, he said.
After the burst of moves during the pandemic, mobility has slowed sharply, Divounguy said. When fewer people form new households, fewer new homes sell.
Divounguy said that a growing glut of finished and under-construction homes is making the math on new projects harder and that builders are leaning on expensive incentives such as mortgage-rate buydowns to move inventory, while rising input costs add more pressure.
More Builders Sitting Out
The result: more builders are sitting out, and permits, starts, and homes under construction are all sliding, Divounguy said.
The building boom is fading just as the country still faces a deficit of 4.7 million homes.
Construction is concentrated where land is plentiful and regulations are looser — the South and Sun Belt — not in the coastal metros where the need is greatest. Until that shifts, even a construction rebound won’t close the gap where it matters most, Divounguy said..
Higher mortgage rates, a soft labor market, and slower population growth are likely to keep a lid on household formation and moves, Divounguy said. And, with fewer homes in the construction pipeline, “new home sales may simply stabilize at a lower level than we’ve seen in recent years.”
