Newly built home sales rose in July to the highest they’ve in almost a decade, signaling continued momentum in the U.S. housing market.

Momentum Building in the Housing Market

July’s seasonally adjusted annual rate of 654,000 new single-family home sales was a 12.4% increase over June, marking the highest level since October 2007, according to the Commerce Department.

Ralph McLaughlin, an economist at real estate website Truila, noted that the increase in new home sales displays continued strong demand in the current low-interest rate, low unemployment environment.

The Wall Street Journal surveyed a group of economists who had predicted home sales to slide in July down to 580,000. June sales were revised from an initially estimated pace of 592,000 down to 582,000.

When compared to the first seven months of 2015, new home sales also rose 12.4% through the first seven months of 2016.

Strong Fundamentals Support the Housing Market

Recovering income growth, steady job creation, and historically low mortgage interest rates have supported purchases of both new and existing homes, and the housing market has been a bright spot in the economy so far this year.

At the end of July, the average rate for a 30-year fixed rate mortgage was 3.48%, down a half percentage point from 12 months prior, according to Freddie Mac.

While new home sales account for roughly a tenth of total U.S. homebuying activity, June’s sales of previously owned homes are also close to a decade-long high, according to the National Association of Retailers.

The National Association of Realtors’ numbers show sales of previously owned homes rose to their strongest pace in nearly a decade in June.

More Room to Grow

Sales of new homes in July were up 31.3% over July 2015, bringing the figure back to the level recorded when the recession began. The pace, however, remains well behind the peak level of 1.39 million in July 2005. July 2016 was the first month with a rate over 600,000 since early 2008. Pre-recession, the last time the rate was so low was 1991.

At the end of July, there was a 4.3-month supply of newly built homes, the smallest supply in three years. The median sale price for new homes sold in the month was $294,600, down slightly from July 2015’s median of $296,000.

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