Lower Mortgage Rates Pushed August New Home Sales Up
Sep 25th, 2019 @ 9:43 AM by Amber Nelson
Sales of new U.S. single-family homes jumped 7.1% in August, according to the Commerce Department, bolstered by lower mortgage interest rates.
Sales outpaced predictions by economists surveyed by Reuters, who had forecast they would grow by just 3.5% last month.
New home sales rose to a seasonally adjusted annual rate of 713,000 in August, up from July’s upwardly revised sales pace of 666,000. August’s gain also represents an 18.0% increase from the previous year.
The median new home price grew 2.2% to $328,400 from August 2018.
New home sales are calculated based on the number of permits pulled by builders and can fluctuate wildly from month to month. They typically make up 11.5% of all home sales.
While rates have started to increase in recent weeks, mortgage interest rates had dropped off sharply at the beginning of August. Those lower rates likely made it easier for buyers to take the plunge on a new house. Mortgage finance company Freddie Mac reports that the average interest rate of 3.73% is 120 basis points lower than this time last year.
August’s new home sales increase is a welcome sign of growth, since investment in residential real estate has declined for the past six consecutive quarters.
Sales in August were most affected in the West, with a 16.5% increase. The South saw a 6.0% percent jump. The South also accounted for the majority of new home sales in August. Sales in the Northeast and Midwest fell by 5.9% and 3.0%, respectively.
Inventory of new homes fell to 326,000 in August, down 1.2% and the lowest supply in almost a year. That represents a 5.5-month supply of new homes at the August sales pace, down from 5.9 months in July. Roughly 63% of the new homes under contract last month were not yet built or still under construction.
Amber Nelson is a seasoned mortgage industry writer and a regular contributor to Loan.com and Mortgage101.com.