New-Home Sales Hit 5-Year High

Increasing mortgage rates do not seem to be slowing new-home sales. Single-family new-construction home sales increased 8.3 percent in June to the highest level since May 2008, according to the Commerce Department. That's up 38.1 percent compared to June of last year — the largest year-over-year increase since January 1992.

With mortgage rates on the rise in recent weeks, some analysts have been concerned that home sales would slow. But the recent increase in mortgage rates hasn't appeared to slow demand as long as home affordability remains high. There are signs, however, that an increased urgency from potential new home buyers is evident as they move to secure today's historically low rates.

The inventory of new homes for sale in June fell to a thin 3.9-month supply, the National Association of Home Builders reported. The low supply is pushing up home prices: median new-home prices rose 7.4 percent in June compared to a year ago.

The Northeast saw new-home sales in June rise 18.5 percent; the West gained 13.8 percent; and the South gained 10.9 percent. The Midwest was the only region that posted a decline in new-home sales in June, falling 11.8 percent.

Source: National Association of Home Builders and “New Home Sales Hit Five-Year High; Prices Soar,” Reuters (July 24, 2013)