It Looks at Lot Like 2008 for New Home Sales

Sales of newly constructed homes took a sharp upturn in June, making the month the best for new home sales since the eve of the housing crash.

New statistics from the U.S. Department of Housing and Urban Development and the U.S. Census Bureau showed sales of new single-family houses in June were at a seasonally adjusted annual rate of 592,000. This is 3.5 percent above the revised May rate of 572,000 and is 25.4 percent above the estimate of 472,000 from June 2015.

This, said Ralph McLaughlin, chief economist at Trulia, was the best monthly performance since February 2008.

“This is a continued sign that demand for homes remains solid and aptly reflects increasing homebuilder confidence,” McLaughlin said. “The share of all home sales composed of new homes ticked upward to 10.6 percent in June, as new home sales continue to slowly ease the crunch of low existing inventory.”

According to the HUD/Census report, the median sales price of new houses sold in June 2016 was $306,700; the average sales price was $358,200. The seasonally adjusted estimate of new houses for sale at the end of June was 244,000. This represents a supply of 4.9 months at the current sales rate.

Robert Denk, assistant vice president for forecasting and analysis at the National Association of Homebuilders, stated that “ongoing gains in the labor market and a favorable interest rate environment should continue to stoke demand for new homes.” However, he added, “NAHB members continue to report challenges meeting the expanding demand because of shortages of developed lots and skilled labor.”

Realtor.com Chief Economist Jonathan Smoke said of June's new home sales report, “Although the key observations for June are statistically insignificant, the year-to-date trend is clearly positive: Actual new homes sold reported so far this year are up 11 percent over the first half of 2015. Plus the increase in the seasonally adjusted annualized rate of new home sales beat analyst expectations. At the June pace of new home sales, the market is up 25 percent over last year, when mortgage rates were rising.”

At the same time, Smoke cautioned that “we unfortunately aren’t seeing signs that builders are expanding offerings of more affordably priced homes. . .There were an estimated 54,000 new home contracts signed in June—the month’s highest volume since June 2007, when there was a surplus of houses for sale. The key difference between then and now is that 40 percent of the new homes sold in 2007 were already built when they were purchased. This June, only 31 percent of new homes sold were completed, indicating that builders are being more conservative. At this point in time, in order to see a substantial gain in sales of new homes, builders need to find a way to build affordable houses that will appeal to first-time buyers.”