New-home sales reached a seasonally adjusted annual rate of 1.01 million in August, according to new numbers from the U.S. Census Bureau and the Department of Housing and Urban Development.
That’s a monthly gain of 4.8% from July’s upwardly revised rate, but perhaps more notably, it marks the first time since November 2006 that the pace of new single-family home sales surpassed 1 million units. In fact, August’s stellar pace, which is up 43.2% from the same month last year, is the highest level of new-home sales since September 2006.
Over the past three months, sales have now averaged a hefty 939,000-unit pace, suggesting that September’s spike in homebuilder confidence has strong legs behind it.
“Surging sales are consistent with record builder confidence levels stemming from higher buyer traffic, historically low interest rates and a shift in demand for lower density markets,” said Chuck Fowke, chairman of the National Association of Home Builders (NAHB).
The spike in sales, along with the continued lack of existing homes on the market, has further tapered the already scant supply of new homes for sale. At the end of August, the seasonally adjusted estimate of new homes for sale was just 282,000. That’s a supply of 3.3 months at the current sales rate, down from 4 months in July and 40% lower than August last year. It’s the lowest number of months’ supply in history, dating back to 1963.
“With inventory at just a 3.3 months’ supply, more construction is needed,” said NAHB chief economist Robert Dietz. “The challenge will be whether materials and labor are available.”
One headwind for builders continues to be the supply and cost of lumber. Fowke, who has noted for months that lumber prices have risen significantly as of late, said that the issue could lead to higher home prices “down the road.”
Interestingly, despite the dwindling inventory, new-home prices also saw a small retreat in August. The median price of a new home slid to $312,800, down from $327,800 in July. It’s the second straight month that the median price for new homes has dropped, but according to Wells Fargo, there’s a simple reason for the emergent trend.
“A growing proportion of home sales are occurring in the South, particularly in smaller and mid-sized metro areas, where new home prices tend to be considerably less than they are in the West and Northeast,” wrote Wells Fargo Securities’ Economics Group. “Moreover the housing market is seeing a surge of first-time buyers that are purchasing homes at the lower end of the price spectrum.”
Wells Fargo noted that the share of new homes for sale at $300,000 or less has jumped 10 percentage points over the past two months, growing from 30% of all sales to 40%. Compare that to one year ago, when sales of such homes comprised just 23% of total sales.