New-home sales spiked to a recent high in June, with the seasonally adjusted annual sales rate hitting 776,000, according to the U.S. Census Bureau and the Department of Housing and Urban Development.
That’s up 13.8% from May’s revised pace of 682,000 and the strongest sales rate since July 2007. Every region of the country saw monthly sales growth, let by an 89.7% spike in the Northeast.
“Record-low mortgage rates and pent-up demand from the spring continue to be main drivers for the housing market this summer. … Sales were up 7 percent year over year, and all regions except for the South were back to a sales pace higher than a year ago,” said Joel Kan, associate vice president of economic and industry forecasting for the Mortgage Bankers Association (MBA).
“Data from MBA’s Builder Applications Survey – released earlier this month – showed a similar increase in the demand for new home purchases.”
Continued strength in the new-home market lends credence to a perceived shift in homebuyer attitudes as the coronavirus pandemic continues to impact the nation. With no previous occupancy, newly built homes theoretically offer more safety and peace of mind from COVID-19 infection. And with people spending more time at home during the pandemic, new homes also provide more potential for customization and are more likely to be internet-friendly.
The new-home market’s potential may be even greater still, wrote the Wells Fargo Securities Economics Group.
“The strength in home sales likely has considerable room to run,” Wells Fargo said. “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.”
Rising demand and sales are taking their toll on new-home supply, with sales-adjusted inventory levels decreasing to an estimate of 307,000 in June, representing a 4.7-month supply at the current sales rate. That 4.7-month figure represents the lowest such figure since 2016; economists generally consider six months a balanced supply.
Growing activity has also helped perk up new-home prices, with the median sales price of new houses sold in June at $329,200. That’s up from $310,200 in May and the largest median sales price of 2020 by month to date, surpassing January’s median of $328,900.
