Sales Mixed, but Still Strong

After dipping in June, new-home sales took flight in July.  Sales were up a whopping 12.4% to 654,000 units on an annualized rate.

Strength was concentrated in two regions – the South and the Northeast. As for the former, the South, sales rose 18.1% to 398,000 units on an annualized rate.  As for the Northeast, sales were up a stunning 40%. But because the new-home market is a small market in the Northeast, that works out to only 35,000 units on an annualized rate.

It appears builders further embraced discounting to move inventory. The median price of a new home fell 5.1% to $294,600 in July. The latest price decline moves the year-over-year median price of a new home to negative from positive. Year over year, the median price is down 0.5%.

A dearth of supply could lead builders to throttle back on discounting going forward. Given the pace of sales, new homes on the market fell by 7,000 to 233,000. This caused monthly supply to fall to 4.3 months from 4.9 months in June. (The all time record was 12.1 months of supply in January 2009.)

The sales figures were less robust on the existing-home front.  Sales of existing homes fell 3.2%  to 5.39 million units on an annualized rate in July. It appears that discounting is cropping up in a few more markets these days. The NAR reports that the median price of an existing home dipped 1.4% to $244,100 in July. The year-over-year price is still positive, though. The median price of an existing home is up 5.3% compared to the same year-ago period.

The existing-home market continues to struggle with the recurrent bugaboo – low inventory – which continues to hamper sales growth. The inventory of existing homes was 5.8% lower in July compared to a year ago. This marked the 14thconsecutive month of year-over-year declines.  Inventory now stands at 4.7 months at the current sales pace.

Yes, the sales data were mixed, but all told, the outlook remains positive. When considering sales, prices, new construction from a long-term perspective, we still see a very healthy market. We don’t expect that perspective to change for years to come.  

Information provided by Jessica Regan.

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