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New Home Sales: ‘Making Up for a Weak Spring Season”

The 30-year fixed-rate mortgage (FRM) averaged 2.90%, according to the result of Freddie Mac’s Primary Mortgage Market Survey (PMMS). It averaged 0.9 point for the week ending sept 24—a bounce from last week’s average of 2.87%. The 30-year FRM averaged 3.64% at the same time a year ago.

Meantime, the 15-year fixed-rate mortgage averaged 2.40% with an average 0.7 point. That’s a bump from last week’s 2.35% average. Turing back the clock to this time a year ago, the 15-year FRM averaged 3.16%. Taking a tumble, the five-year Treasury-indexed hybrid adjustable-rate mortgage averaged 2.50% with an average 0.2 point, compared to last week’s average, 2.96%.

According to Danielle Hale, Realtor.com Chief Economist, for the first time since 2006, new homes sales breached the one million mark. They spiked 43.2% from last year and 4.8% from an upwardly revised July figure, fueled by home shoppers scurrying to leverage low mortgage rates and “perhaps make a move to secure new virtual learning space as the new school year started in August.” Compared to a year ago, new home sales continue to come in significantly higher, she continued. “They’re making up for a weak spring season. In fact, more new homes have already sold in 2020 than did in all of 2019.”

In light of stock market volatility and sustained economic uncertainty, investors remained in “a wait-and-see position” this week, said George Ratiu, Freddie Mac's Senior Economist. That prompted an uptick of three basis points in the 30-year fixed mortgage rate, to 2.90% in today’s Freddie Mac report, he noted. “Low mortgage rates continue to be a potent fuel for housing markets, driving demand higher and setting up a competitive fall home buying season.”

Sales of existing homes continue rising, while inventory reaches new lows, he added.

Gregg Logan, Managing Director with RCLCO Real Estate Advisors commented that, "With only 3.3 months of supply of new homes at the current pace, we are concerned about the sustainability of the month to month increases that we’ve seen, without stronger construction boosting inventory."

And First American's Deputy Chief Economist Odeta Kushi added that, “Looking ahead, there are two possible constraints to new home sales. On the demand side, the potential for increasing layoffs may impact potential home buyers. Buying a home is typically the largest financial decision a person will make, and that is predicated on strong consumer confidence and job stability. On the supply side, new home sales are largely dependent on the amount of new construction being built. Supply-side headwinds, particularly high lumber costs, could constrain builder momentum.”

Looking back to earlier this summer, June sales of new single-family homes came in at 776,000—a 13.8% increase from May, according to data from the U.S. Census Bureau and the Department of Housing and Urban Development, reportedly.

This was also a 13.7% increase from June 2019’s estimate of 726,000.

“New home sales keep roaring along, spurred by pent-up demand. Not enough existing homes are up for sale, so shoppers are buying new homes,” said Holden Lewis, Home and Mortgage Specialist, NerdWallet.

The median sales price for new homes in June was $329,000 and the average sales price was $384,700.

The U.S. Census Bureau revealed June had an estimated 4.7 months’ supply of homes.

Every region of the nation posted increases in new-home sales, with the largest monthly gain coming in the northeast at 89.7%. The northeast also had the highest annual rise at 111.5%.

About Author: Chuck Green

Chuck Green has contributed to the Wall Street Journal, Washington Post, Los Angeles Times, San Francisco Chronicle, Chicago Tribune and others covering various industries, including real estate, business and banking, technology, and sports

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