The numbers: Sales of new single-family homes in August exceeded an annual rate of 1 million for the first time since 2006, as buyers were forced into the market for newly-constructed properties thanks to the dearth of home listings.
New home sales occurred at a seasonally-adjusted, annual rate of 1.011 million, the Census Bureau reported Thursday. That represents a 4.8% increase from an upwardly-revised pace of 965,000 homes in July. Compared with last year, new home sales are up 43%.
Economists polled by MarketWatch had expected home sales to drop to median pace of 900,000.
What happened: Not all parts of the country saw an uptick in sales despite the historically high rate nationally. New home sales fell 21.4% in the Midwest and 1.7% in the West. Comparatively, the South saw the biggest increase in sales with a 13.4% jump, while sales volumes rose by 5% in the Northeast.
The median sales price in July was $312,800, down from July’s median price. The inventory of new homes fell to just 282,000, representing a 3.3-month supply at the current pace of sales. That’s down from a 4-month supply in July. A 6-month supply is considered the benchmark for a balanced market.
The big picture: The burgeoning interest in newly-constructed homes largely stems from the lack of existing-homes for sale. While existing-home sales have also occurred at a fast pace, the inventory of homes left on the market is fast dwindling.
Sellers have been reluctant to list their properties despite that. A new report from Realtor.com found that nearly 400,000 fewer homes have been listed for sale since the start of the pandemic compared with a year ago.
Meanwhile, record-low mortgage rates continue to awaken demand among buyers, as evidenced by mortgage application data from the Mortgage Bankers Association. While this data is volatile, the trend line suggests that there will continue to be strong momentum in home sales, according to High Frequency Economics chief U.S. economist Rubeela Farooqi.
Home prices could become a barrier for the real-estate market though. The combination of low supply, low interest rates and high demand has sent prices skyward — and some buyers could eventually find themselves priced out of the market.
What they’re saying: “Already, more new homes have sold in 2020 than did in all of 2019,” said Danielle Hale, chief economist at Realtor.com. “With the number of existing homes for sale down consistently and considerably from a year ago, new homes are an important segment of opportunity for home shoppers.”
Market reaction: The Dow Jones Industrial Average
remained flat, while the S&P 500
rose slightly in Thursday morning trading. Shares of home-building firms PulteGroup
, LGI Homes
, and Lennar Corp.