Strong demand, low interest rates and fewer existing homes for sale helped contribute to an uptick in new home sales in August even as home prices continue to rise. Sales of newly built, single-family homes in August rose 1.5% to a 740,000 seasonally adjusted annual rate from an upwardly revised reading in July, according to newly released data by the U.S. Department of Housing and Urban Development and the U.S. Census Bureau. Sales are up 2.4% on a year-to-date basis.
“New home sales stabilized in late summer following a cooling trend that took hold last winter,” said Chuck Fowke, chairman of the National Association of Home Builders (NAHB) and a custom home builder from Tampa, Fla. “Builder sentiment remains strong and housing demand is being supported by ongoing low mortgage interest rates and a shortage of existing home inventory.”
“After the volatility of 2020, with significant declines for new home sales in the spring followed by an unsustainable rebound during the second half of the year, new home sales have cooled somewhat,” said NAHB Chief Economist Robert Dietz. “Home prices are up 20% from a year ago due to higher construction costs, and these price hikes are a risk for housing affordability as we approach the end of the year.”
A new home sale occurs when a sales contract is signed or a deposit is accepted. The home can be in any stage of construction: not yet started, under construction or completed. In addition to adjusting for seasonal effects, the August reading of 740,000 units is the number of homes that would sell if this pace continued for the next 12 months.
Inventory stands at a balanced level of a 6.1-months’ supply, with 378,000 new single-family homes for sale, 74.3% higher than August 2020. While inventory is rising, a growing share is of homes that have not started construction. As of August 2021, 28% of new home inventory consists of homes that have not started construction, compared to 21% a year ago.
The median sales price was $390,900, remaining flat from July to August, but was up 20% from the $325,500 median sales price posted a year earlier, due to higher development costs, including materials.
Regionally, on a year-to-date basis, new home sales fell 1.0% in the Northeast and 2.3% in the West, but rose 4.4% in the Midwest and 4.5% in the South.