New Home Sales Aren't Growing Much, Despite Intense Demand
As the real estate market clamors for more inventory of single-family homes, new home sales aren't stepping up fast enough.
Sales of new homes basically treaded water in June (to borrow an apt description from MarketWatch), missing estimates slightly and increasing less than 1% from May, which was revised lower. Sales are up 9% from a year ago.
This would be decent growth if real estate industry wasn't so eager for more inventory to come on the market.
Ward McCarthy of Jefferies notes, "While new home sales are not suffering from the supply bottlenecks to the same extent as existing home sale, new home inventories also remain relatively low."
Zillow Chief Economist Svenja Gudell says the headline number looks better than the underlying real estate trends reflected in the report. She writes:
Almost 70 percent of new homes sold in June were sold before they were finished or had even begun construction, an indicator of intense demand similar to the hunger for existing homes. And this says nothing of the fact that because these homes aren't finished, they won't be move-in ready for months, meaning owners of existing homes that are moving into these new homes will not be in much rush to list their current home and sell to someone else. While there are more new homes for sale now than at any point since June 2009, that's not saying much -- aside from the lean years during the crash and in the slow recovery to follow, there are roughly as many new homes available for sale today as there were in April 1993 when Bill Clinton was president. The median price of new homes is falling, a signal that builders could be aiming for a more entry-level clientele, but new home prices still remain well above existing home prices, and the biggest growth in recent new home sales activity has been in the pricey $500,000-$700,000 segment.
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