New Home Sales Spike in June, Despite COVID Growth in U.S.
Highest levels since 2008 market crash
According to new data by the U.S. Department of Housing and Urban Development and the U.S. Census Bureau, sales of newly built, single-family homes in the U.S. rose to their highest level since the Great Recession.
Sales were up 13.8 percent to a seasonally adjusted annual rate of 776,000 units in June, 2020. The June rate is 6.9 percent higher than the June 2019 pace.
"While Wall Street may have been expecting a smaller gain, anyone following the NAHB/Wells Fargo Housing Market Index would know these numbers are in line with what we are hearing from builders," said Chuck Fowke, chairman of the National Association of Home Builders. "Builders are moving to ramp up production to meet growing demand."
"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."
A new home sale occurs when a sales contract is signed or a deposit is accepted. The home can be in any stage of construction: not yet started, under construction or completed. In addition to adjusting for seasonal effects, the June reading of 776,000 units is the number of homes that would sell if this pace continued for the next 12 months.
Inventory fell to a 4.7 months' supply, with 307,000 new single-family homes for sale, 7 percent lower than June 2019. The current months' supply is the lowest since 2016. Of the inventory total, just 69,000 are completed, ready to occupy. The median sales price was $329,200. The median price of a new home sale a year earlier was $311,800.
Regionally, on a year-to-date basis new home sales were up in all four regions: 22 percent in the Northeast, 12.6 percent in the Midwest, 0.2 percent in the South, and 3.1 percent in the West.
The Mortgage Bankers Association's AVP of Economic and Industry Forecasting Mr. Joel Kan commented, "Record-low mortgage rates and pent-up demand from the spring continue to be main drivers for the housing market this summer. New home sales picked up for the second straight month in June, in line with various other housing market indicators showing strong demand following the pandemic-induced low in April. The 776,000 unit sales pace for June was the strongest since July 2007, and is an increase of almost 14 percent nationally over the month. 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. Data from MBA's Builder Applications Survey - released earlier this month - showed a similar increase in the demand for new home purchases."