More home shoppers purchased newly constructed homes in November, bringing new-home sales to their best three-month performance since 2007, the U.S. Commerce Department reported Monday. Economists credit low mortgage rates, low unemployment, and strong income growth for the sales uptick.
Sales of new single-family homes increased 1.3% to an annualized pace of 719,000 in November. “Fueled by the limited number of resales available for purchase, low interest rates, and low unemployment, new home sales are finishing the year strong,” says Greg Ugalde, chairman of the National Association of Home Builders. New-home sales are running 10% higher than in 2018. Plus, builder confidence is high, indexes show, which bodes well for 2020, adds NAHB Chief Economist Robert Dietz.
Low inventory of new homes, however, continues to put pressure on prices. The median sales price of a new home rose 7.2% compared to a year ago, reaching $330,800 in November. Inventory of new homes stand at a 5.4-month supply. There are 323,000 new single-family homes for sale (but just 76,000 are completed and ready to occupy).
New home sales are performing strongest in the South, up 14.5% from a year ago in November, followed by a 12% increase in the West. In the Northeast and Midwest, meanwhile, new-home sales are down 10.4% and 7.6%, respectively.
Inventory remains a pressing issue for the overall housing market in both the new-home and existing-home markets. Lawrence Yun, chief economist at the National Association of REALTORS®, says that housing starts are short by 135,000 compared to the long-term average—and well short of the 5 million to 6 million that is needed to fully end the housing shortage.
“More home construction appears to be on the way as we move into 2020, as reflected in the very high confidence of home builders,” Yun said last week. “They are clearly recognizing an improving business opportunity. Overall, more construction will mean more housing inventory to choose from for consumers. Home sales can then easily rise while taming the fast growth in home prices.”
Last week, NAR also released a report that showed sales of previously owned homes fell in November, likely due to inventory constraints. Yun said existing-home sales likely will be “choppy when inventory levels are low,” but a strong economy should help keep demand strong.
Source: “U.S. New-Home Sales Rise to Cap Best Three Months Since 2007,” Bloomberg (Dec. 23, 2019) and National Association of Home Builders