U.S. new-home sales fall 10.5% in July

U.S. housing demand is showing fresh signs of strain as elevated borrowing costs continue to squeeze buyers, potentially putting homebuilder and housing-related ETFs under pressure.

New-home sales plunged 10.5% month over month in July to a seasonally adjusted annual rate of 607,000, sharply missing economists’ expectations for a 1.4% decline.

The figure was the lowest in six months and, excluding January, the weakest since November 2022, highlighted by The Kobeissi Letter in a post on X.

US housing demand has collapsed.

US new home sales fell -10.5% MoM in July, to 607,000 units, the lowest in 6 months and far worse than the -1.4% decline expected.

Excluding January 2026, this is the lowest level since November 2022.

New home sales have now fallen in 3 of the… pic.twitter.com/Emf55C0Hab — The Kobeissi Letter (@KobeissiLetter) August 26, 2026 At the same time, 30-year mortgage rates remain close to 7%, keeping affordability under pressure.

Homebuilder ETFs Face a Tougher Backdrop The deterioration puts homebuilder ETFs squarely in focus.

The SPDR S&P Homebuilders ETF (NYSE: XHB ) provides broad exposure to the U.S. housing ecosystem, while the iShares U.S.

Home Construction ETF (BATS: ITB ) offers more concentrated exposure to homebuilders.

The housing slowdown matters because weaker sales can eventually translate into slower construction, reduced orders for building materials and pressure on builders’ margins and earnings expectations.

The mortgage market is already flashing caution.

The Mortgage Bankers Association, cited by CNBC, said total mortgage application volume fell 1% last week, with purchase applications declining 0.3% and running 5% below year-ago levels.

Refinance applications dropped 2% for the week and 17% year over year.

Joel Kan, MBA vice president and deputy chief economist, said that purchase activity was down over the week, noting that the purchase market has also slowed over the past two months, according to CNBC.

Rates Remain the Key Variable The average 30-year fixed mortgage rate for conforming loans rose to 6.78% from 6.77%, its highest level in three weeks, according to the MBA.

That leaves investors watching whether mortgage rates can move decisively lower.

Mortgage News Daily reported that rates eased this week as falling oil prices pushed Treasury yields lower.

A sustained decline in yields could provide some relief to housing demand.

But if rates remain elevated, housing-sensitive ETFs could face a more difficult earnings environment.

Where Investors Could Look Instead Investors seeking to reduce direct housing exposure could consider shorter-duration fixed-income ETFs such as the SPDR Bloomberg 1-3 Month T-Bill ETF (NYSE: BIL ) and iShares 1-3 Year Treasury Bond ETF (NASDAQ: SHY ).

Meanwhile, the iShares MBS ETF (NASDAQ: MBB ) provides direct exposure to agency mortgage-backed securities, making it another ETF to watch as mortgage rates and Treasury yields fluctuate.

For now, the housing data suggests the 6.8% mortgage-rate environment is becoming increasingly difficult for buyers, and that could make housing ETFs one of the more important places to watch if the slowdown deepens.

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