New Home Sales Hold Steady
The US Census Bureau and HUD reported new home sales for August remained virtually unchanged from a revised July level at 373,000. The last two months set the highest levels in new home sales since the momentary bump provided by the home buyer tax credit in 2010. The current levels are driven by underlying pent up demand, buyers taking advantage of record low mortgage rates and very affordable home prices.
The median home price rose 17% from August 2011, which is the largest year-over-year increase since 2004. The increase is more likely to be a result of the kind of home sold than any significant change in underlying home prices. There was a small shift in the sales distribution from the lower cost South (down 9,000 seasonally-adjusted annual sales rate) to the more expensive Northeast (up 6,000 SAAR) and 21% of the homes sold were over $400,000 compared to 14% in calendar 2011.
The increase is also the likely impact of move-up buyers taking a larger share of the market. Because of the overly strict lending standards, current new home buyers are more likely to have a down payment, be continuously employed and have sufficient credit scores to qualify. Those same characteristics are more likely to occur in the move-up buyer who purchases a more expensive home.
The inventory of unsold new homes once again established a historic low at 141,000 and the number of completed new homes within that group also dropped to a new all-time low of 38,000. In a normal market where potential home buyers have a wider selection of alternatives, there would be 100,000 completed homes ready for immediate occupancy.
The steady level of new home sales supports other housing data showing continued improvement in the housing sector as the number of markets seeing improvement continues to grow.