Newly Built Home Prices Notch Record, New Home Inventory Highest Since 2008: Government Report

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Sales of new single-family homes increased in July after three straight monthly declines, at the same time, the median price of a newly built home notched a record high, according to a government report on real estate sales.

As the economy attempts to rebound from the pandemic, one bright spot is that sales of new single-family homes rose 1% in July to a seasonally adjusted annualized rate of 708,000, rising from 701,000 in June, according to data released on Tuesday by the Census Bureau. A year ago, sales were down more than 27%. The figure represents how many homes would have been sold over a yearlong period of time if the same number were bought in each month based on the rate of sales in July.

The median sale price for a new single-family home climbed to $390,500 – up from 18.4% from a year ago, which is a new record. Also in July, the average price reached $446,000, which is a new record – up 17.6% from a year ago.

“The median existing-home price for all housing types in July was $359,900, up 17.8% from July 2020 ($305,600), as each region saw prices climb,” the Associated Press reported. “This marks 113 straight months of year-over-year gains.”

The inventory of new homes for sale rose 5.5% to 367,000, which is the highest level of new homes for sale since November 2008.

“Despite a surge in home prices to record levels, new home sales eked out a small gain in July,” wrote Nancy Vanden Houten of Oxford Economics. “While demand for new homes remains strong, high prices and backlogs in construction will temper sales in the months ahead.”

“The inventory of new homes for sale rose in July to highest level since 11/08 when housing market was unraveling,” Houten wrote on Twitter. “But unlike then, when almost 50% of supply was of finished homes, just 10% of inventory now is of completed homes.”

“It is promising that the overall trend in home sales is up from prior years and that the recent drop in sales has begun to reverse,” said Kelly Mangold, a principal with RCLCO Real Estate Consultants. “This means that new home deliveries are coming closer to matching the demand generated by household growth.”

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According to Reuters, broken down by region: 1.3% increase in the South and 14.4% rise in the West. However, sales plummeted 24.1% in the Northeast and went down 20.2% in the Midwest.

“The pandemic has accelerated the migration to suburban markets and metro areas in lower-cost states such as Arizona, Utah, Texas and Florida,” said Mark Vitner, a senior economist at Wells Fargo in Charlotte, North Carolina. “By contrast, new home sales weakened in areas where population growth has slowed, in part due to an outflow of residents seeking more affordable real estate, lower taxes and other lifestyle advantages.”

“Still, it is promising that the overall trend in home sales is up from prior years and that the recent drop in sales has begun to reverse,” Kelly Mangold, a principal with RCLCO Real Estate Consultants said in a statement. “This means that new home deliveries are coming closer to matching the demand generated by household growth; America has under delivered housing units since the Great Recession, which has contributed to the increasing cost of housing.”

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The inventory of new homes available for sale in July was 367,000, slightly more than six months worth of supply at current sales levels.

“With real estate markets moving toward more balance, we can expect buyers to continue seeking affordability,” Realtor.com Manager of Economic Research George Ratiu said in a statement. “Buyers still in the market can expect more inventory and less competition over the next six months, especially as we move into the colder fall and winter seasons.”

A major factor in the steady stream of home sales is that mortgage interest rates are still around record lows.

“Mortgage rates dipped Tuesday, continuing their erratic, but relatively narrow, up-and-down pattern of the past two weeks,” according to Investopedia. “The 30-year fixed rate declined four basis points to 3.04%, bringing the average within 15 points of the 2.89% five-month low set August 3.”

In June, there were 2.6 months of housing inventory for sale, according to the National Association of Realtors – an improvement from January’s 1.9 months. Despite the projected increase of inventory in the second half of the year, the housing market bubble isn’t expected to burst.

“It’s still going to be a very strong housing market. Demand is still going to be well in excess of supply,” said Greg McBride, chief financial analyst at Bankrate.com. “It just won’t be as frenetic as what had been experienced earlier in the year.”

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