New home sales kept up the strong pace from June and soared in July, and while the news didn’t come as a surprise, it’s definitely welcomed.

According to the latest estimates released jointly by the U.S. Census Bureau and the Department of Housing and Urban Development, new home sales in July were at a seasonally adjusted annual rate of 654,000, which is up 31.3% from July 2015. This is also 12.4% above the revised June rate of 582,000.

Note: The margin of error on these findings is 12.7%

This marks the best month for new home sales since October 2007, Trulia Chief Economist Ralph McLaughlin said.

“This is a continued sign that demand for new homes remains solid in a low interest rate, low unemployment environment,” he continued. “July’s surge in new home sales continues to support the sentiment that demand for homes is strong despite homebuyers facing low existing inventory.”

The report also posted that the median sales price of new houses sold in July 2016 was $294,600, and the average sales price was $355,800.

The seasonally adjusted estimate of new houses for sale at the end of July was 233,000, representing a supply of 4.3 months at the current sales rate.

“July new home sales data was a surprise, but a welcome one,” said Zillow Chief Economist Svenja Gudell.

“For years, the market has been practically begging builders to both ramp up their efforts overall and to put more focus on serving the less expensive end of the market,” said Gudell. “Today's data confirms both are happening in earnest. Sales were up by double digits in all areas, and the dip in price will be welcome relief to buyers struggling to find affordable inventory in this incredibly tight market.”

While this is positive news in today’s current, low-inventory environment, the industry has a lot further to go.

“Inventory overall is also up meaningfully since last year, but it's important not to get too excited by one report. Yes, new home sales activity is at its highest in years — but remains lower than at any point in the decade-plus between the early-mid 1990s and 2007,” Gudell noted.  

Rather, she explained that the industry is going to need to see several more months of even higher sales activity, closer even to 1 million units, before its sees meaningful dents in inventory limitations.

Looking ahead, Genworth Mortgage Insurance Chief Economist Tian Liu said, he expects greater stability in the next few months.

“We see tremendous growth potential in new home sales as housing demand continues to grow and the continued supply shortage of newer vintage homes,” he said. “The limiting factor to that growth will be the limited supply of land and labor, and homebuilder’s focus on higher-price segments.”

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