June Sees Highest Levels of New Home Sales Since Great Recession
New homes are being purchased at the highest levels in years. Can home builders keep up with the demand?
According to data from the U.S. Census Bureau, new home sales were up 13.8 percent in June compared to the month before. Sales of newly-built single-family homes rose to a seasonally-adjusted annual rate of 776,000 units, up nearly seven percent from June 2019.
“It is quite surprising and remarkable that, in the midst of a global pandemic, contract activity for home purchases is higher compared to one year ago,” Lawrence Yun, chief economist for the National Association of Realtors, told CNBC.
Low mortgage rates and pent-up demand from construction activity shutdowns earlier in the year have given the housing industry an economic boost, driving the industry forward despite coronavirus concerns. This upward trend has left builders increasingly optimistic, as reflected in the latest Housing Market Index from the National Association of Home Builders.
“Along with rising builder sentiment, we are seeing increasing consumer demand in the suburbs, exurbs and rural areas,” said NAHB Chief Economist Robert Dietz. “At the same time, builders are dealing with supply-side concerns such as rising material costs, particularly lumber, which surpassed its 2018 price peak this week. Nonetheless, low inventory levels point to construction gains ahead.”
Economic data from the Federal Reserve Bank of St. Louis shows that housing inventory levels are indeed low. Inventory fell to a 4.7 months supply in June, a mark seven percent lower than last year and the lowest level since 2016. Of the 307,000 new single-family homes for sale, only 69,000 were finished and ready to occupy.
The median sales price of a new single-family home was $329,200.
“While the outlook is promising, sharply rising lumber prices are concerning,” Yun said to CNBC. “A reduction in tariffs — even if temporary — would help increase home building and thereby spur faster economic growth.”