Fence-Sitters No More: New Home Sales Soar on Rising Rates

Fence-Sitters No More: New Home Sales Soar on Rising RatesConvinced by rising interest rates and strong home prices, more consumers are taking the plunge into a tight market, pushing new-home sales to a five-year high in June.
The government data does not show how many previous “fence sitters” jumped into the market out of fears of surging mortgage rates. Nonetheless, the numbers are impressive.
Sales of newly-built, single-family homes jumped 8.3 percent to a seasonally adjusted, annual rate of 497,000 units in June, beating all Wall Street estimates.
That’s the fastest pace in the last five years, according to data released Wednesday by HUD and the U.S. Census Bureau.
The inventory of new homes for sale declined to 161,000 units in June, marking a razor-thin, 3.9-month supply at the current sales pace. The months’ supply of homes for sale has not fallen below this level since March of 2004.
“New-home buyers are returning to the market in larger numbers as firming prices, shrinking inventories of homes for sale and improving local economies convince them that now is the time to make their move,” said Rick Judson, chairman of the National Association of Home Builders (NAHB) and a home builder from Charlotte, N.C.
Meanwhile, a very low supply of new homes are on the market, an indicator of the uphill battle for builders trying to keeping up with demand. Obstacles include availability of materials, credit, labor and lots for development, Judson said.
Wednesday’s report means the housing recovery is “solidly on track and isn’t going to be derailed by slightly higher mortgage rates,” said NAHB Chief Economist David Crowe.
“After years of fence-sitting, buyers are back and are ready to move forward with an investment in homeownership,” he said.
Three out of four regions saw solid gains in new-home sales activity in June, with the Northeast, South and West posting increases of 18.5 percent, 10.9 percent and 13.8 percent, respectively.
The Midwest posted an 11.8 percent decline following an above-trend bump in activity in May.

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