(Associated Press) The market for newly constructed homes in the U.S. continued its upward climb in August, despite the ongoing pandemic and lingering worries about the future of the U.S. economy.
The Commerce Department said sales new homes rose by a very strong 4.8% in August to a seasonally-adjusted annual rate of 1.01 million units. That’s on top of the massive jump in new home sales that happened in July, climbing that month by 13.9%.
The gains reported Thursday by the The Commerce Department follow steep declines in March and April when COVID-19 infections spread in the U.S. The pace picked back up in the summer, driving home prices in many places to record highs.
Record low mortgage rates as well as pent up demand from earlier in the year appear to be driving sales far more strongly than most economists had anticipated.
“The August figure is the first reading above 1 million since 2006, so both new and existing home sales registered their best results since 2006 in August,” wrote Stephen Stanley, chief economist at Amherst Pierpont “The level beat expectations by over 100K.”
During a broad sell-off this week across all major U.S. stock markets, shares of almost every one of the nation’s largest home builders rose Thursday.
New home sales are now up 43.2% from this point last year.
The median price of a new home sold was $312,800, according to the Commerce Department.
U.S. average rates on long-term mortgages rose slightly this week but remain at historically low levels.
Mortgage buyer Freddie Mac reported Thursday that the average rate on the 30-year home loan edged up to 2.90% from 2.87% last week. One year ago, the rate averaged 3.64%.
The average rate on the 15-year fixed-rate mortgage also rose, to 2.40% from 2.35% last week.
Low interest rates have made demand for housing even stronger, but supply remains scarce. The National Association of Realtors reported Wednesday that the number of existing homes for sale in August was 1.49 million units, a decline of 18.6% from this time last year.
Although sales of existing homes rose 2.4% in August to its highest level since 2006, the lack of inventory is pushing prices higher, causing some concern. NAR said the median price for an existing single-family home reached $315,000 in August, up 11.7% from last year. Last month was the first time the median price for a home breached $300,000.
Economists worry that the price increases could take buyers out of the market, especially those seeking to own a home for the first time.
A lack of available homes has been a problem for years, long before the virus outbreak spooked many homeowners into staying put.