News & Opinions
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Eye on the Economy: New Home Sales Hit Five-Year High
David Crowe / NAHB / July 25, 2013
Economic and housing data continue to describe a modest recovery for housing that will lead to higher levels of construction activity in the years ahead. While some recent information illustrates that there will be ups and downs along the way, current fundamentals indicate rising demand and insufficient housing inventory.
Mortgage interest rates have risen, but thus far there is no evidence to suggest that these increases have changed the overall improving trend for housing. Qualifying for a mortgage, including accumulating the necessary downpayment, remains a larger challenge for most home buyers as opposed to recent rate increases.
Leading the good news for housing was the June new home sales report from the Census and HUD. Sales of newly built homes were up 8.3% over May, reaching an annualized pace of 497,000, the highest rate in five years. Sales were up in three of the four regions, with a 12% drop in the Midwest due to May’s unsustainably high rate.
The inventory of new homes for sale rose slightly, but the months’ supply (the time it would take to sell the remaining inventory at current sales pace) dropped to 3.9. The months’ supply level ties January 2013 for the lowest level since March 2004. The number of completed new homes for sale remains at the lowest level (36,000) ever recorded in the 40 years of data. Builders have been struggling to resupply inventory as they battle increases in costs and reduction in supply of all their inputs: labor, land, building materials and capital.