Sales of new homes jumped in August even as buyers had to contend with prices making steady gains.
The higher development costs and prices of building materials have sent new home costs soaring, with the median price rising 20% from one year ago. In August, the median sales price for a new home hit $390,000, according to the latest data from the Commerce Department.
Robert Dietz, chief economist at the National Association of Home Builders, warned that the price hikes “are a risk for housing affordability as we approach the end of the year.”
That said, new homes continue to sell like hot cakes. With mortgage rates still lower than their historic average and a limited supply of existing homes for sale, not to mention fewer new homes actually being built, buyers are snapping them up as fast as builders can mke them. In August, sales of new single-family homes rose 1.5% from the previous month to a seasonally-adjusted rate of 740,000. Compared to the same month last year, new home sales are up 2.4%.
NAHB Chairman Chuck Fowke said new home sales stabilized in late summer following a brief cooling off that occurred the previous winter. “Builder sentiment remains strong and housing demand is being supported by ongoing low mortgage interest rates and a shortage of existing home inventory,” he said.
Inventory of new homes has actually increased, despite the stronger sales. The NAHB said the new home market currently has a 6.1-month supply, which it says is “balanced”. That’s up 74.3% from the same month one year ago. It said however, the inventory reflects a growing share of homes that have not actually started construction. Around 28% of the new homes in that inventory haven’t yet broken ground.