New-Home Sales Unexpectedly Surge to Almost Nine-Year High
Purchases of new U.S. homes unexpectedly jumped in July to the highest level in almost nine years, led by soaring demand in the nation’s South and adding to signs of persistent housing-market strength.
Sales increased 12.4% to a 654,000 annualized pace, the fastest since October 2007, Commerce Department data showed Aug. 23 in Washington. That exceeded the most optimistic forecast in a Bloomberg News survey. Purchases in the South were the strongest since before the start of the latest recession.
Employment gains and historically low borrowing costs are providing firm support for housing demand, helping to reduce inventory, which probably will keep new construction elevated. The report showed an increase in the share of homes sold for less than $300,000, indicating builders are turning their sights to entry-level buyers.
The median forecast of 72 economists surveyed by Bloomberg called for the pace of sales to decelerate to 580,000. Estimates ranged from 540,000 to 610,000.
The Commerce Department revised the June reading lower to a 582,000 pace from a previously estimated 592,000. It’s still less than half the record pace of 1.39 million sales in 2005, before the housing bubble burst.
The Commerce Department said there was 90% confidence that the change in sales last month ranged from a 0.3% drop to a 25.1% increase, underscoring the volatility of the data.
The increase in demand in July included an 18.1% jump in the South to a 398,000 rate, the highest since July 2007. In the Midwest, demand was the strongest since November 2007, while the Northeast posted a gain and the West was unchanged.
The supply of homes fell to 4.3 months from 4.9 months in June. There were 233,000 new houses on the market at the end of July, the least since November.
The median sales price of a new house declined 0.5% from July 2015 to $294,600, the Aug. 23 report showed.
New-home sales, which account for about 10% of the residential market, are tabulated when contracts are signed. That makes them a timelier barometer than transactions on existing homes.
July sales figures for previously owned U.S. homes are set for release from the National Association of Realtors on Aug. 24. Those purchases unexpectedly climbed in June to the strongest level in more than nine years, helped by first-time buyers. Economists in the Bloomberg survey ahead of the Aug. 24 report forecast little change from the prior month.
The average rate on a 30-year, fixed mortgage was 3.43% in the week ended Aug. 18, close to the record-low 3.31% reached in 2012, according to Freddie Mac figures dating to 1971.
