New single-family home sales surged in July, as housing demand was supported by low interest rates, a renewed consumer focus on the importance of housing, and rising demand in lower-density markets like suburbs and exurbs.
Census and HUD estimated new home sales in July at a 901,000 seasonally adjusted annual pace, an approximate 14% gain over June and the strongest seasonally adjusted annual rate since the end of 2006. The April data (570,000 annualized pace) marks the low point of sales for the current recession. The April rate was 26% lower than the prior peak, pre-recession rate set in January.
The gains for new home sales are consistent with the NAHB/Wells Fargo HMI, which equaled a data series high in August, demonstrating that housing is the leading sector for the economy. Consider that despite double-digit unemployment, new home sales are estimated to be 8% higher for the first seven months of 2020 compared to the first seven months of 2019.
Sales-adjusted inventory levels declined again, falling to a just a 4 months’ supply in July, the lowest since 2013. This factor points to additional construction gains ahead. The count of completed, ready-to-occupy new homes is just 61,000 homes nationwide. Total inventory declined almost 9% year-over-year, with inventory down to 299,000.
Moreover, sales are increasingly coming from homes that have not started construction, with that count up 34% year-over-year. In contrast, sales of completed, ready-to-occupy homes are down almost 24%. These measures point to continued gains for single-family construction ahead.
Thus far in 2020, new home sales are higher in all regions. Sales on a year-to-date basis are 5% higher in the South, 9% in the West, 20% in the Midwest, and 22% higher in the Northeast.