In August, new single-family home sales in the US climbed 20.5%. That’s the highest annualized pace they’ve reached – 800,000 units – at least since last winter, based on data released by the US Census Bureau on Wednesday. Measuring the increase The increase marks the fastest sales pace since the beginning of 2022 and far beyond economists’ expectations. We’ve heard from analysts that hope the increase would be led by declining mortgage rates. They note that builders seem to be providing purposeful concessions to sway reluctant buyers.
The jump in new home sales reflects the recent boom in contract signings. This trend seems to be an early sign of a broadly expected housing-market shift. As Redfin Chief of Economics Research Chen Zhao explained here, the uptick in sales could show that buyers are responding positively to lowering mortgage rates. These rates have fallen precipitously this month. The average rate on a 30-year mortgage has dropped down to 6.26%. This dip has analysts eagerly predicting increased movement in the housing market in the months ahead.
Thomas Ryan, senior economist at Capital Economics, noted that easier borrowing costs were the biggest factor in driving new home sales. This trend illustrates the dramatic effect of cheaper loans on the housing market. In doing so, most buyers had moved back over due to elevated mortgage rates. With capital costs coming back down, there are exciting new opportunities on the housing market front.
Not all experts share the enthusiasm expressed by Cohen over the prospect of this growth being sustainable. Nancy Vanden Houten, lead US economist at Oxford Economics, cautioned that the jump in new home sales “likely overstates any improvement in housing activity.” She underscored the fact that new homes represent barely 14% of all home sales in the US today. This indicates that, while great sales figures, they may not be telling the whole story reflecting what’s going on with the overall market.
Economists at Wells Fargo expressed a slightly different sentiment, warning against jumping to conclusions based on the data. They remarked, “Take the gain with a huge grain of salt,” emphasizing that new home sales often undergo significant revisions. They foresee some signs of stabilization in the upward trend of sales. This fits in with what we have seen over the last year.
While these concerns persist, it is important to note that there is recognition of pent-up demand in the housing market. Eric Teal, chief investment officer at Comerica Wealth Management, remarked, “There is pent-up demand in housing, but affordability remains out of reach for many first-time homeowners.” This reality is behind still utterly tragic news to courageous hopeful buyers … still struggling against the barrier of high prices and low inventory.