U.S. new-home sales have surged to its fastest pace since before the great recession despite the pandemic. Sales of new homes have increased by 4.8% the Census Bureau announced last week. The housing marked extended its winning streak as Americans continued taking advantage of record-low mortgages. Sales of new single-family homes exceeded an annual rate of 1 million for the first time since 2006. New home median sales prices fell to $312,800. The average sale price was $369,000.
The report also revealed a growing strain in housing supply. The estimate of new homes for sale fell to 282,000 from 291,000. At the housing market’s current rale of sale, there is a supply of 3.3 months. A 6-month supply is considered the benchmark for a balanced market.
The growing interest in newly-constructed homes largely stems from the lack of existing homes for sale. While existing-home sales have also increased at a fast pace, the inventory of homes left on the market is depleting. Despite this, some sellers have been reluctant to sell according to a report from Realtor.com. The article found that nearly 400,000 fewer homes have been listed for sales since the start of the pandemic compared to last year.
Through the coronavirus pandemic, the U.S. housing market has been one of the few industries to enjoy a V-shaped rebound. In March, the Federal Reserve lowered mortgage rates and spurred a pickup in home sales. The messaging from the central bank that rates would stay low for years, added fuel to the market rally. Some, however, fear that the sharp resurgence is on its last legs.
“While strong demand and lower mortgage rates are supportive of home sales, the slow recovery and weak labor market pose downside risks that we expect will weigh on home sales in the months ahead,” said Nancy Vanden Houten, a researcher at Oxford Economics.
Prices for homes could become a barrier for the real estate market. Low supply in combination with low interest rates and high demand has sent prices upward. Some buyers could eventually find themselves priced out of the market.
There are some other indications that have pointed to a lasting demand in the sector. Home-builder optimism reached an all-time high in September, according the National Association of Home Builders/Wells Fargo Housing Market Index. Throughout the summer, sales of existing homes have trended in line with new-unit purchases.
“Already, more new homes have sold in 2020 than did in all of 2019,” said Danielle Hale, chief economist at Realtor.com. “With the number of existing homes for sale down consistently and considerably from a year ago, new homes are an important segment of opportunity for home shoppers.”
The Census Bureau’s full release can be found here.