Low Rates Helped Spur 7.1% Jump in New Home Sales in August

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New home sales were at a seasonally adjusted annual rate of about 713,000 in August, an increase of 7.1% compared with a revised estimate of 666,000 in July and an increase of 18.0% compared with 604,000 in August 2018, according to the U.S. Census Bureau and the Department of Housing and Urban Development.

Regionally, and year-over-year, new home sales increased 11.7% in the South and 7.8% in the West. However, sales were down 16.5% in the Northeast and 10.5% in the Midwest.

The median sales price of new home sold in August was $328,400. The average sales price was $404,200.

As of the end of August there were about 326,000 new homes available for sale in the U.S. – about a 5.5-month supply at the current sales rate.

“With job growth continuing and lower interest rates in place, builders report rising confidence levels, and this is reflected in today’s solid sales report,” says Greg Ugalde, chairman of the National Association of Home Builders (NAHB), in a statement.

“We have seen a general rebound in the housing market since spring, as sales, starts and permits have all registered gains,” adds Danushka Nanayakkara-Skillington, assistant vice president for forecasting and analysis for NAHB. “However, affordability remains a factor because buyers can’t benefit from lower interest rates if they don’t have the money for a downpayment.”

Odeta Kushi, deputy chief economist for First American, says “demand for new homes remains strong as household formation continues to grow, and purchasing power is buoyed by low mortgage rates and rising household income.”

“The lack of existing homes for sale nationwide to meet this demand is supportive of new construction,” Kushi says. “Indeed, you can’t buy what’s not being built.”

Kushi adds that the increase in new home sales in August “is a reflection of this dynamic.”

“And the good news is that the growth in both housing starts and permits in August is a sign of more new home sales to come,” she says. “In a market with low mortgage rates and a healthy labor market, if you build it, they will buy it.”

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