The FINANCIAL — Sales of newly built homes reached the highest level since early 2008 in August, evidence that demand for housing is strengthening heading into the fall.
Sales of new, single-family homes rose by 5.7% to a seasonally adjusted annual rate of 552,000, the Commerce Department said on September 24, according to Nasdaq.
The reading was well above economists’ forecast for a rate of 515,000 and comes after July’s reading was revised up to 522,000 from an initially estimated 507,000.
The latest data “point to robust momentum in new home sales,” said Stephen Stanley, economist at Amherst Pierpont Securities. He said strong readings could continue for several months because weather delays in the first half of the year may cause housing markets to “remain busy later into the year than usual.”
The latest figure marks a new a postrecession high, supplanting February’s reading. From February until July, sales had settled somewhat but were well above year-earlier levels. The data largely indicates low-interest rates and stronger job creation are supporting demand for new housing.
New-home sales account for about 10% of the home purchase market, with existing homes making up the rest. Month-to- month data can be volatile; August’s increase had a margin of error of plus or minus 16.2 percentage points.
From a year earlier, sales were up 21.6% in August.
Many home builders are reporting steady, year-over-year sales gains in the low double-digit percentages. KB Home on Thursday reported a 19% increase in orders in its fiscal quarter ended Aug. 31 from a year ago. On Monday, Lennar Corp. posted a 10% gain in orders for its quarter ended Aug. 31.
“Our results reflect the slow but steady growth in the overall home-building market,” Lennar Chief Executive Stuart Miller said on a conference call with investors. “This year’s summer season, and the spring selling season before it, confirm that the market is continuing to improve at a fairly consistent pace.”
Home-builder sentiment is at its highest level in nearly a decade, according to a survey earlier this month from the National Association of Home Builders. The group reports increased buyer traffic and improving sales conditions. Builders however are concerned about future sales conditions, including the expectation that interest rates will rise later this year.
Meanwhile, sales of existing homes have returned to levels recorded just before the recession began in 2007, though they slipped in August after a strong start to the year, according to data from the National Association of Realtors.
Thursday’s report showed August’s median sales price of new homes was $292,700, a 0.3% rise from a year earlier. Sales increased most strongly in the Northeast, up 24.1% from July, but declined 9.1% in the Midwest, the only region to see a drop-off.
Fischer Homes, a closely held builder operating in Ohio, Kentucky, Indiana and Georgia, has seen more first-time buyers in the market in recent months as well as an increase in older buyers. The company’s sales increased by 12% in the first eight months of this year compared with the same period last year. It anticipates building more than 1,000 homes this year.
“We’re just seeing a broader mix of people coming into the market,” said Fischer Marketing Manager Stephen Whaley.
Positive signals from the housing market could give greater confidence to the Federal Reserve as central bankers debate when to raise interest rates for the first time since 2006.
At a news conference last week, Fed Chairwoman Janet Yellen said the housing market “remains very depressed” in comparison to steady jobs gains.
Despite a large increase in sales, new construction of single-family homes only has increased 8.7% from a year ago in August, according to separate Commerce data. As a result, the inventory of available properties is limited.
The number of new homes for sales rose by 1,000 in August from a month earlier to 216,000. At the August sales pace, it would take 4.7 months to exhaust the supply of for-sale new homes. A year earlier, there was a 5.4-month supply of homes.
Home construction is “below levels that seem consistent with underlying demographics,” Ms. Yellen said last week. ” Demand for housing should be there and should materialize as the job market improves and income growth improves.”