September 27, 2019
As mortgage rates continue to drop due to trade tensions and slower economic growth, U.S. new home sales climbed 7.1% in August.
New homes sales have increased to a seasonally adjusted annual rate of 713,000, up from a revised 666,000 in July, according to the Commerce Department. So far in 2019, sales have risen 6.4%.
Low interest rates are currently helping homebuyers, but new construction has not yet met the demand from potential buyers, so sales gains could translate to higher prices.
The 30-year mortgage rate averaged 3.73% last week, down from 4.65% a year ago according to Freddie Mac.
August’s average sales price rose 6.1% from a year ago to $404,200. That number is likely driven up by a shortage of affordable homes available for purchase.
“Sales of entry-level homes, priced below $200,000 accounted for only 10% of total, as builders remained focused on the upper end of the market,” George Ratiu, senior economist at Realtor.com told the Associated Press.
An uptick in home construction and sales of existing homes, as well as the jump in new home sales, may signal a strengthening housing market.
In the South and West, home sales climbed, but slipped in the Northeast and Midwest. A 16.5% monthly sales gain in the West was signaled in increased purchases of homes priced above $400,000, compared to July.
“This makes the housing data three-for-three in August, as housing starts, existing home sales, and new home sales all increased and were noticeably stronger than expected,” Stephen Stanley, chief economist at Amherst Pierpont told the Associated Press. “This may reflect the plunge in mortgage rates as well as the moderation in home price appreciation so far this year.”
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