Lower mortgage rates are prompting more home buyers to consider new-home construction, builders say. Sales of newly built single-family homes surged in August, rising 7.1% to a seasonally adjusted annual rate of 713,000 units, the Commerce Department reported Wednesday. This marked the second time in three months that new-home sales rose above 700,000. Further, new-home sales have now jumped 18% compared to a year ago.
The latest report follows on the heels of other positive housing data released last week. Housing starts and building permits surged to a more than 12-year high in August. Home resales also increased to the highest level in 17 months, the National Association of REALTORS® reported. (Read: Home Sales Up for Second Consecutive Month and More New Homes Are Entering the Pipeline)
“This positive data caps off a month of redemption for the housing market,” said John Pataky, executive vice president at TIAA Bank in Jacksonville, Fla. “If American consumers remain in good spirits, there is no reason this positive momentum can’t continue, so long as prices remain in check and housing supply does not get critically low.”
“With job growth continuing and lower interest rates in place, builders report rising confidence levels, and this is reflected in today’s solid sales report,” says Greg Ugalde, chairman of the National Association of Home Builders.
The 30-year fixed-rate mortgage has fallen about 120 basis points compared to last year’s highs. It has averaged about 3.73% in recent weeks, according to Freddie Mac data.
The median sales price of a new home sold in August was $328,400, which is slightly up from a $321,400 median a year ago. Only 10% of sales last month were priced below $200,000, the most sought after, analysts note. The inventory of new homes for sale in August was 326,000, about a 5.5-month supply, the Commerce Department reports.
On a regional basis, new-home sales rose by the highest amounts in the West, increasing 16.5%, followed by a 6% increase in the South in August. Sales fell 5.9% in the Northeast and posted a 3% drop in the Midwest.