Americans bought new homes in June at the fastest pace in more than eight years, a sign that a solid job market and low mortgage rates are bolstering the U.S. housing market.
The Commerce Department said Tuesday that new-home sales rose 3.5 percent last month to a seasonally adjusted rate of 592,000, the best level since February 2008. Purchases of new homes have climbed 10.1 percent year-to-date, despite volatile sales on a monthly basis.
“Today’s report confirms the considerable strength in the housing market over the past few months,” said Rob Martin, U.S. economist at Barclays.
Low mortgage rates and a healthy job market have lifted residential real estate, which continues to recover from the depths of the housing bust that began nearly a decade ago. Greater demand and tight inventories have led to rising prices and signs that housing will help overall economic growth.
But affordability remains a problem, and the potential of new-home sales returning to their historic average sales rate of 650,000 could be limited.
June’s median sales price rose 6.1 percent from a year ago to $306,700. Just 4.9 months’ supply of new homes is listed for sale, well below this historic average of six months. Sales surged in the West and Midwest by more than 10 percent in June, but declined in the Northeast and South.
The market for new houses is roughly just a 10th of the size of the existing-home market, where sales are also rising even as the number of listings are shrinking on a yearly basis. The National Association of Realtors said last week that sales of existing homes rose 1.1 percent in June to a seasonally adjusted annual rate of 5.57 million, the best performance since February 2007. But the number of listings has fallen 5.8 percent from a year ago to 2.12 million.
Builders remain relatively confident that they'll continue to expand, although their optimism waned slightly in July.
The National Association of Home Builders/Wells Fargo builder sentiment index dropped one point to 59. Readings above 50 indicate more builders view sales conditions as good, rather than poor. The index had mostly held at 58 this year before rising to 60 in June.
Builders say they’re struggling to find both workers and land for additional construction. Still, the number of construction jobs has risen by 217,000 over the past 12 months as home sales and apartment rentals are helping to drive growth in an economy hampered recently by global turmoil.
Construction of single-family houses has increased, rising 4.4 percent to a seasonally adjusted annual rate of 778,000 in June.
Propelling much of this demand has been an improving job market coupled with cheaper borrowing costs.
The unemployment rate is a solid 4.9 percent. Employers added 287,000 workers in June, a strong rebound after the pace of hiring slipped in April and May.
Buyers have also benefited from interest rates staying close to record lows. Mortgage buyer Freddie Mac said the average for the benchmark 30-year fixed-rate mortgage was 3.45 percent last week, down sharply from 4.04 percent a year ago.