New Home Sales on the Rise in July

The U.S. Census Bureau and the U.S. Department of Housing and Urban Development have jointly announced new residential sales statistics, which found that sales of new single‐family houses in July 2021 were at a seasonally-adjusted annual rate of 708,000, which was 1% (±11.3%) above the revised June 2021 rate of 701,000, but 27.2% (±7.3%) below the July 2020 estimate of 972,000.

“The new home sales report released today by the Census Bureau showed a 1% increase in new home sales in July to an annualized pace of 708,000, in line with our expectations,” said Mark Palim, Deputy Chief Economist at Fannie Mae. “In addition, the June sales number was meaningfully revised upward by 3.7%. With the annual comparison reflecting the past summer’s sales surge, new home sales were down 25.9% from a year prior, but were still at a pace similar to the 2019 rate.”

The median sales price of new houses sold in July 2021 was $390,500, up $28,700 over June 2021’s median sales price of $361,800. The average sales price hit $446,000 in July, $17,300 over the previous month’s average sales price of $428,700.

“The outlook for new home sales is largely dependent on the amount of new homes being built and demand for new homes,” said First American Deputy Chief Economist Odeta Kushi. “The current pace of building is limited by multiple supply-side headwinds, but the July increase in the number of permits issued is a positive sign of more building to come.”

HUD and the Census Bureau also reported the seasonally‐adjusted estimate of new houses for sale at the end of July was 367,000, representing a supply of 6.2 months at the current sales rate.

“By stage of construction, the share of completed homes sold ticked up slightly in July, but it is still near a 15-year low. Remember builders are dealing with rising costs of materials, delays and shortages of lots and labor,” said Kushi. “On the demand side, the fundamentals driving new home sales are strong–low rates, a limited supply of existing homes for sale, and sturdy demand driven by millennials aging into homebuying. But declining affordability and lack of inventory push against these tailwinds.”

RE/MAX’s July 2021 National Housing Report for July 2021 found that despite continued high demand, July inventory climbed 4.0% from June 2021, marking the first two consecutive months of month-over-month inventory gains since April and May 2019. In terms of inventory, RE/MAX’s Report found that the number of homes for sale was also down 29.7% from July 2020. Based on the rate of home sales in July 2021, the Months’ Supply of Inventory was flat at 1.3 compared to June 2021, and decreased compared to 2.0 in July 2020. A six months’ supply indicates a market balanced equally between buyers and sellers.

“A positive sign in the report for future sales is a further increase in the number of homes for sale at the end of the month, which hit the highest level since November 2008,” said Palim. “At the current pace of sales, the months’ supply was 6.2, the highest since April 2020. However, the increase was disproportionately driven yet again by homes for which construction had not yet begun. Combined with another increase in the share of homes sold but not yet started, the report highlights the ongoing difficulties that homebuilders are having keeping up with demand. Anecdotes of homebuilders turning down orders to give themselves time to work through their order books have continued over the past month. Therefore, we expect sales to move upward as the year continues, as sufficient demand is present, but the pace at which acceleration occurs will likely be determined by the speed at which homebuilders can clear their current backlogs and overcome material availability and other supply constraints.”

Builders continue to struggle as data from the latest NAHB/Wells Fargo Housing Market Index (HMI) indicates that continued rising construction costs and supply shortages, along with an upswing in home prices, pushed builder confidence to its lowest reading since July 2020, with builder sentiment in the market for newly-built, single-family homes fell five points to 75 in August.

The NAHB noted that costs due to the price of materials continued to mount for new homes, as changes in the price of softwood lumber products that occurred between April 17, 2020 and July 8, 2021 have added $29,833 to the price of an average new single-family home.