US new-home sales climb to best level since late 2007

Flickr  Garreth Wilcock

“July’s positive report shows there is a need for new single-family homes, buoyed by increased household formation, job gains and attractive mortgage rates”, said NAHB Chief Economist Robert Dietz.

The housing market has been a bright spot in the economy this year. “We see tremendous growth potential in new home sales as housing demand continues to grow and the continued supply shortage of newer vintage homes”.

Sales increased 12.4 per cent from June to a 654,000 annualised pace, the fastest since October 2007, Commerce Department data showed. The latest figure brings new-home sales back to the level recorded just before the recession began.

July’s increase, however, likely exaggerates housing market strength as it has not been matched by robust housing starts.

Construction of single-family houses has picked up this year as the market has extended its recovery from the drop-off caused by the housing meltdown that began almost a decade ago. Residential construction was a minor drag on economic growth in the second quarter.

With central bank interest rates at between 0.25% and 0.5%, the cost of mortgage borrowing has been low for house buyers.

New home sales have been strong since entering 2016. The largest US electronics retailer on Tuesday reported a higher-than-expected quarterly profit and raised its earnings outlook. The seasonally adjusted estimate of new houses for sale at the end of July was 233,000 units, which represented a supply of 4.3 months at the current sales rate. Relatively few listings of existing homes on the market have steered more would be-be buyers into newly built houses. The demand has eclipsed the pace of construction.

The median sales price of new homes sold in July was $294,600; the average sales price was $355,800.

“That is the tightest that new home supplies have been since 2013”, says economist Diane Swonk. Toll Brothers vaulted 8.5 percent. The dollar was little changed against a basket of currencies, while prices for USA government debt fell. The South came next, with 18.1 percent.

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