New Home Sales Post 2nd Consecutive Strong Monthly Increase
New home sales beat expectations again in June, HUD and the Census Bureau reported Friday, posting double-digit increases for the second straight month.
The report said sales of new single-family houses in June rose to a seasonally adjusted annual rate of 776,000, 13.8 percent higher than the revised May rate of 682,000 and nearly 7 percent higher than a year ago (726,000).
All four regions saw increases in June; in particular, the Northeast saw June sales increase a headline-inducing 89 percent from May, to 55,000 units, seasonally annually adjusted, from 29,000. From a year ago, sales in the Northeast jumped by 111.5 percent.
In the largest region, the South, sales rose by 7.2 percent to 434,000 units in June, seasonally annually adjusted, from 405,000 units in May but fell by nearly 2 percent from a year ago. In the West, sales jumped by 18 percent in June to 203,000 units from 172,000 units in May and improved by 4.1 percent from a year ago. In the Midwest, sales increased by 10.5 percent in June to 84,000 units from 76,000 units in May and improved by 33.3 percent from a year ago.
“Record-low mortgage rates and pent-up demand from the spring continue to be main drivers for the housing market this summer,” said Joel Kan, Associate Vice President of Economic and Industry Forecasting with the Mortgage Bankers Association. “New home sales picked up for the second straight month in June, in line with various other housing market indicators showing strong demand following the pandemic-induced low in April.”
Kan noted data from theMBA Builder Applications Survey released earlier this month showed a similar increase in the demand for new home purchases.”
Mark Vitner, Senior Economist with Wells Fargo Securities, Charlotte, N.C., said home builders have been reporting strong buyer traffic amidst low inventories.
The broad-based strength in new home sales reflects a shift in consumer attitudes toward homeownership,” Vitner said. “With people spending more time at home during the pandemic, many households are looking for more space to accommodate remote workspaces and the presence of more people in the home for more of the day. New homes provide homebuyers better options, as new homes are more apt to be internet friendly and have more open space. Inventories of existing homes remain persistently low,making new homes a more viable option.”
Vitner said the strength in home sales “likely has considerable room to run. Mortgage rates recently hit new lows and applications for mortgages to purchase a home are nearly 20% above their year ago level. The nation’s demographics also increasingly favor homeownership. The number of millennials turning 40 will rise every year through the end of this decade.”
Doug Duncan, Chief Economist with Fannie Mae, Washington, D.C., noted the ratio of new single-family home sales to single-family starts remained elevated in June, “indicating that homebuilders will have to increase the pace of construction significantly to fulfill current orders and maintain a healthy sales pace.”
HUD/Census reported the median sales price of new houses sold in June rose by 5 percent annually to $329,200; the average sales price rose by 4 percent annually to $384,700. The seasonally adjusted estimate of new houses for sale at the end of June fell to 307,000, representing a supply of 4.7 months at the current sales rate.