STORY: Sales of new U.S. single-family homes plunged to a 6-1/2-year low in July, as steep mortgage rates and house prices strain affordability.

The housing market is the sector hardest hit by the aggressive interest rate increases delivered by the Fed to tame inflation by slowing economic activity.

A Tuesday (August 23) report from the Commerce Department showed new home sales tumbled 12.6% to a seasonally adjusted annual rate of 511,000 units last month, making it the lowest level since January 2016.

Sales rose in the Northeast, but dove in the West and the Midwest as well as the South... dropping nearly 30 per cent on a year-on-year basis in July.

Tuesday’s report added to a stream of weak housing data.

Last week, a report showed single-family houses starts in July- which account for the biggest share of homebuilding- tumbled to a two-year low.

Mortgage rates, which move in tandem with U.S. Treasury yields, have soared this year. The 30-year fixed-rate mortgage is averaging 5.13%, up from 3.22% at the start of 2022.

Despite slowing demand, house prices remain strong. The median new house price in July was $439,400, an 8.2% jump from a year ago.