Sales of newly built single-family homes jumped 4.8% on an adjusted basis in July compared with August, reaching an annual rate of 1.011 million, according to estimates from the U.S. Census Bureau and the U.S. Department of Housing and Urban Development.
Year-over-year, new home sales were up 43.2% compared with August 2019.
The increase follows a 13.9% month-over-month jump in July.
New home sales have now increased every month since April.
Regionally, and on a year-to-date basis, new home sales were up 23.6% in the Northeast, 23.6% in the Midwest, 13.9% in the South and 12.4% in the West.
The median sales price of a new home sold in August was $312,800. The average sales price was $369,000.
Supply of new homes, however, dropped to a new low. As of the end of the month, there were only 282,000 new homes available for sale – just a 3.3-month supply at the current sales rate.
“In today’s housing market, if you build it, they will buy it,” says Odeta Kushi, deputy chief economist for First American, in a statement. “August new home sales topped an annual rate of 1 million for the first time since 2006. The accelerated pace is no surprise, given the growing demand for homes and lack of existing homes for sale.”
“Looking ahead, there are two possible constraints to new home sales,” Kushi says. “On the demand side, the potential for increasing layoffs may impact potential home buyers. Buying a home is typically the largest financial decision a person will make, and that is predicated on strong consumer confidence and job stability. On the supply side, new home sales are largely dependent on the amount of new construction being built. Supply-side headwinds, particularly high lumber costs, could constrain builder momentum.
“Yet for the near future, mortgage rates are anticipated to remain low and the labor market decline has thus far disproportionately hurt younger, lower-wage renters, keeping home-buying demand robust,” Kushi adds. “Similarly, builder confidence reached new highs in September and the inventory of new homes for sale is at a three-year low, which should support increased construction in the months to come.”
Data from the National Association of Home Builders (NAHB) shows that supply of new homes is now at the lowest level since at least 1963.
“Surging sales are consistent with record builder confidence levels stemming from higher buyer traffic, historically low interest rates and a shift in demand for lower density markets,” says Chuck Fowke, chairman of NAHB, in a statement. “However, higher lumber costs and limited building material availability in some markets signify we could see higher prices down the road.”
“New home sales are now 15 percent higher on a year-to-date basis, with gains in all regions,” adds Robert Dietz, chief economist for NAHB. “But with inventory at just a 3.3 months’ supply, more construction is needed. The challenge will be whether materials and labor are available.”