New Home Sales Continued to Rise in June

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New home sales in June were at a seasonally adjusted annual rate of 776,000, an increase of 13.8% compared with 682,000 in May and an increase of 6.9% compared with 726,000 in June 2019, according to estimates from the U.S. Census Bureau and U.S. Department of Housing and Urban Development.

The median sales price for a new home sold in June was $329,200. The average sales price was $384,700.

As of the end of the month, there were about 307,000 new homes available for sale in the U.S. That’s about a 4.7-month supply at the current sales rate.

The increase follows a 16% month-over-month increase in May.

Earlier this week, the National Association of Realtors (NAR) reported that existing-home sales rebounded in June, rising 20.7% compared with May to a seasonally-adjusted annual rate of 4.72 million.

However, existing-home sales were still down 11.3% on a year-over-year basis.

New homes sales are generally more robust compared with existing sales because demand is stronger for new homes.

The question now is whether the current rise in COVID-19 cases in certain states results in new lockdowns and how much that slows the recovery of the job market.

“The housing market has proven resilient in the face of the pandemic thus far,” says Mark Fleming, chief economist for First American, in the firm’s most recent Potential Home Sales Model. “Bolstered by record low mortgage rates and demand stemming from millennials aging into their household formation years, the potential for existing-home sales has rebounded, nearing its pre-pandemic level.

“Yet, risks remain,” Fleming adds. “House-buying power is a function of both mortgage rates and income, and the longer the labor market decline continues, the higher the risk that household incomes could fall. Similarly, the rate of household formation may slow if the labor market slowdown continues or worsens. The pandemic has already influenced some long-term trends, like increasing tenure and limited supply, and may soon also influence other key housing market dynamics, such as household income growth and formation.”

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