June New Home Sales Edge Up as Prices Fall

By Mark Lieberman

Managing Director and Senior Economist

Highlights

  • Pace of contracts for new home sales IMPROVED 0.8 percent in June – the fifth monthly gain this year;
  • Unsold inventory ROSE 3,000 to 272,000 – highest level since June 2009
  • With higher sales rate, months’ supply of new homes for sale ROSE to 5.4 months in June;
  • Median price of a new home FELL $13,500 from May to $310,800;
  • Year-year the median price of a new home was down $10,800 (3.4 percent)

 

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Despite a decline in builder confidence – and notably a drop in buyer traffic – the pace of new home sales improved in June, the fifth month-month gain this year, the Census Bureau and Department of Housing and Urban Development reported Wednesday

The report followed by one day, data from Case Shiller showed its home price index improved (in May) to its highest levels since the summer of 2007.

But the higher prices don’t seem to have dissuaded buyers – except perhaps for first time homebuyers many of whom are still struggling with student loan payments. Indeed a new study by the Federal Reserve Bank of New York contended student debt and higher college tuitions “can explain between 11 and 35 percent of the observed approximate eight-percentage-point decline in homeownership for 28-to-30-year-olds.”

That’s significant because the homeownership rate for college graduates is higher than for those without a college degree.

The National Association of Realtors reported Monday existing home sales in June fell 1.8 percent from May while the median price was up almost 4.5 percent to $263,800. The $11,300 increase in the median price of an existing home was the steepest since May 2013, when the median price of an existing home also increased $11,300 from the previous month.

The NAR report tracks closed sales while the government report on new home sales tracks contracts.

The government reported last week the number of permits and starts for new homes each rose in June with both single- and multi-family activity increasing. That data suggested better times ahead for the housing construction sector but has not yet translated into increased sales. The sales market for new (and existing) homes received a boost with a report student loan borrowers may be off the hook for billions of dollars of loan obligations because of paperwork snafus. Student loan obligations have been a speed bump for would-be buyers.

Realtors had been complaining about the lack of inventory. Indeed, the inventory of existing homes for sale slipped in June but the inventory of new home increased.
The drop in prices for new homes could draw buyers back into the market as the price drops offset an increase in mortgage rates.

 

 

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