New information from the Commerce Department on newly built home sales came as a fresh indication of robust momentum in the U.S. housing market. Purchases of new single-family homes increased 10.1% in the first half of 2016 when compared to the same period in 2015.
Rob Martin, a Barclays economist, said in a note to clients that he expects the market to continue to solidify over the medium term, with prices and volumes supported by a buoyant household sector.
Home Sales Hit 8-Year High
Sales in June were up 3.5% over May to a seasonally adjusted annual rate of 592,000, the strongest monthly pace since February 2008. Compared to a year earlier, sales in June were up 25.4%.
As sales of newly built homes make up only roughly 10% of the total U.S. home-buying market, data on these purchases is volatile from month to month and often subject to revision. According to the Commerce Department’s report, the estimate that sales rose 3.5% in June comes with a margin of error of 23.9 percentage points.
Sales of new homes were up 14.6% in 2015, compared to 1.9% in 2014, 16.6% in 2013 and 20.3% in 2012, showing overall relative strength in recent years.
Housing Market & the US Economy
The housing sector has supplied a steady boost for overall U.S. economic growth over the past couple years. Fixed residential investment contributed 0.52 percent to Q1’s 1.1% growth rate for GDP, representing the largest measure of goods and services produced across the U.S. economy.
Previously Owned Home Sales
Sales of previously owned homes also rose, up 1.1% in June compared to May. According to the National Association of Realtors, June’s seasonally adjusted annual rate of 5.57 million homes is the highest since February 2007.
Home sales have been aided by historically low interest rates. According to Freddie Mac, the average rate for a thirty-year fixed-rate mortgage was 3.57% in June, down from 3.98% last June.
According to Federal Reserve Chairwoman Janet Yellen, both home sales and construction have seen gradual improvement, and while mortgage credit is tough to obtain for households with hard-to-document income or low credit scores, those with favorable credit histories can borrow at very friendly terms.
Home Inventory Remains Unchanged
Inventories have remained tight, though, placing upward pressure on home prices. With the absolute level of inventories low, single-family housing starts will be driven by changes in demand for new homes, according to MFR Inc. Chief U.S. Economist Joshua Shapiro.
According to the Commerce Department’s report, the median sale price for new homes sold in June was $306,700, up 6.1% from June 2015.
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