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New Home Construction and Sales
The US resale homes market in 2020 is getting traction through July and August to the fall, and it looks like the new home construction market is picking up production too.
Let’s take a look at new reports from the 2 leading authorities on the new home market.
New Home Sales
HUD reported in June (July report not out yet), that sales of new single-family houses in June 2020 of 776,000 units. That was a 13.8% rise from the May new home sales rate of 682,000 units, which was 6.9% better than the 726,000 sold in June 2019. The median sales price of new houses sold in June 2020 was $329,200 and the average new home price was $384,700. Demand is strong so higher volumes for sale bodes well for sales in July, August and September.
Builder Optimism is High
The US Commerce Department says builder optimism is high and with low interest rates and big preference for buyers, there’s little to stop significant sales in August and September. The only drawbacks are regulation and high lumber prices. With buyers finding houses for sale scarce, the new home market is vital to the health of the real estate market.
New Home Construction Rates Rise Briskly
Yesterday’s Commerce Department home construction report showed new home building is up 22.6% in July. And new new home starts accelerated to a seasonally adjusted 1.5 million in July, the highest rate since February 2020. Amazingly, this rate is 39% higher than July of 2019.
Apartments and condominium construction rose 56.7% and single-family home construction chipped in a further 8.2%. In previous months, multifamily units were in a construction and sales drought. Applications for building permits jumped almost 19% last month to 1.5 million.
The CD reported that construction grew in all regions of the US in July: 35.3% in the Northeast, 33.2% in the South, and 5.8% in both the Midwest and the West.
Previously, Taylor Morrison Homes the No. 5 U.S. home builder, whose sales declined 30% in April versus a year earlier, reported a 17% increase in May. “We’ve seen that momentum continue,” CEO Sheryl Palmer says. “How we can go from peak to trough back to peak again, all in about 10, 12 weeks, is unlike anything I’ve seen.” — from Barrons news report.
The reason for the growth in new home sales may be due to a big change in home buyer’s values. With the threat of Covid 19 and a preference for the burbs or rural areas, new work at home routines, and low mortgage rates, some buyers see new homes as the right choice going forward into 2021.
NAHB New Construction Report July
NAHB also reported on the growth in new housing construction starts. Single-family starts rose to a 940,000 seasonally adjusted annual rate, after up from June’s revised starts of 869,000 units.
“As the nation reopens, housing is well-positioned to lead the economy forward. Inventory is tight, mortgage applications are increasing, interest rates are low and confidence is rising. And buyer traffic more than doubled in one month even as builders report growing online and phone inquiries stemming from the outbreak.” said NAHB Chairman Dean Mon, a home builder and developer from Shrewsbury, N.J.
Construction starts for 5+ unit multifamily apartment and condo buildings rose 57% to a 547,000 pace in July. Yet this is still a 11% decline for multifamily construction vs January 2020. There were were also 678,000 multifamily units already under construction during last month, which is 10% higher than last July of 2019. Multifamily permits increased 22.5% to a 512,000 pace.
I’ve forecasted that home prices will rise this summer. It may even be a bidding war market.
New Home Inventory Falling
In June, new home inventory fell to a 5.6 months supply, with 318,000 new single-family homes for sale. Inventory is down 16.4% from May 2019. Only 76,000 units are completed, ready to occupy. The median new home sales price was $317,900 while the median price twelve months ago was $312,700.
Across the US, the year-to-date basis new home sales were up in all US regions: 6.8% in the Northeast, and 1.4% in the West, 0.3% in the South, and 9.5% in the Midwest.
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New Residential Home Sales
NAHB’s Robert Dietz reported home builders using pricing incentives in April, but have since reduced those incentives as sales have picked up.
New Housing Construction Starts
Census.gov reported privately-owned housing starts in May rose 4.2% to a seasonally adjusted annual rate of 974,000. This was 4.3% above the revised April estimate of 934,000, and is still below last May’s rate of 1,268,000 units. This drop of 650,000 homes started per month has created a huge shortage of new homes. With demand picking up, home prices should rise.
Home Builder Confidence Rising
And home builders are forecasting better times for buyer demand and sales across the US. Builder confidence in the market for newly-built single-family homes jumped 6 points to 78 in July, according to the NAHB /Wells Fargo Housing Market Index (HMI).
Don’t forget to check the housing market in 2021, and more on major metro markets in including Los Angeles, Denver, Dallas, Philadelphia, Atlanta, Boston and New York. See the state forecasts for Florida and California.
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