New-home sales jumped 7.1% in August as low mortgage rates pulled buyers into the housing market.
The Commerce Department said Wednesday that new-home sales increased to a seasonally adjusted annual rate of 713,000, up from a revised 666,000 in July. So far this year, sales have risen 6.4%.
The data add to the positive signals recently for a housing market that struggled in 2018 and into this year. Mortgage rates are a big part of the picture, as they slipped earlier this month to the lowest level since 2016.
Trade tensions and slower economic growth have pushed down interest rates, helping homebuyers for the moment. But new construction has yet to meet the demand, so the sales gains could translate into higher prices.
The median sales price increased 2.2% from a year earlier to $328,400.
The report showed that more expensive homes, those priced at $400,000 and up, represented a larger share of unadjusted sales in August.
Economists said there was a shortage of lower-priced homes available.
"Sales of entry-level homes, priced below $200,000, accounted for only 10% of the total, as builders remained focused on the upper end of the market," said George Ratiu, senior economist at Realtor.com.
Much of last month's sales growth came from homes that have yet to be built, a sign that the low mortgage rates are behind the surge in purchases. The 30-year mortgage rate averaged 3.73% last week, down from 4.65% a year ago, according to mortgage buyer Freddie Mac, the Federal Home Loan Mortgage Corp.
The data are consistent with other housing-market indicators. Existing-home sales, which make up about 90% of transactions, rose to the highest level in more than a year. Housing starts jumped unexpectedly as well, surging at the fastest pace since mid-2007 and indicating that residential construction may contribute to economic growth for the first time since the end of 2017.
The supply of homes at the current sales rate dropped to 5.5 months, down from 5.9 months in July. The number of new homes for sale at the end of the month declined to 326,000, the fewest since September 2018.
"This makes the housing data three-for-three in August, as housing starts, existing-home sales, and new-home sales all increased and were noticeably stronger than expected," said Stephen Stanley, chief economist at Amherst Pierpont.
Home sales climbed in the South and the West but slipped in the Northeast and the Midwest. The 16.5% monthly sales gain in the more expensive West was reflected by the increase in purchases of homes priced above $400,000 compared with July.
New-home purchases account for about 10% of the market and are calculated when contracts are signed. They are considered a timelier barometer than purchases of previously owned homes, which are calculated when contracts close. The figures tend to be volatile.
Information for this article was contributed by Bani Sapra of The Associated Press and by Katia Dmitrieva, Jordan Yadoo and Sophie Caronello of Bloomberg News.
Business on 09/26/2019