Low mortgage rates and pent up demand from buyers drove sales of new houses to a 13-year high in June, according to a government report.
Builders sold 776,000 houses at an annualized and seasonally adjusted pace, a gain of 14% from the upwardly revised May gain of 19.4%, the Commerce Department said Friday in a report that counts signed contracts as sales. That beat the expectations of economists, who expected a June advance of 4%, according to a survey conducted by Trading Economics.
Houses sold at the fastest pace since July 2007 as mortgage rates tumbled to record lows set last week, when the average U.S. rate for a 30-year fixed mortgage fell below 3% for the first time in a data series that goes back to 1971, according to Freddie Mac.
While potential buyers are getting a deal with financing costs, they have to contend with a shortage of available properties in the existing home market that stretches back to last year and has been made worse by the COVID-19 pandemic.
“Pent up demand for housing has been unleashed as states have reopened, and low mortgage rates sweeten the deals,” said Robert Frick, an economist for Navy Federal Credit Union.
All U.S. regions posted a gain in sales, led by a 90% jump in the Northeast, a region that was under strict lockdowns during April and part of May. The West had an 18% increase in sales, the Midwest rose 11%, and the South advanced 7.2%, the report said.
The so-called months supply number that measures how long it would take to sell off current inventory fell to 4.7 months, the lowest in almost four years.
Measured by the state of construction – another gauge of demand – the number of properties sold that hadn’t yet been started rose to a seasonally adjusted 233,000, a more than two-year high. Builders sold 253,000 houses that were under construction, and 290,000 completed houses.