New U.S. single-family homes sales surprisingly increased last month, hitting their highest level in almost 9 years as demand widely increased, brightening the housing market forecast. On Tuesday, the Commerce Department reported, new home sales hiked 12.4% to a seasonally adjusted yearly rate of 654,000 units last month, the highest level since October 2007. Next, June’s sales rate was revised down to 582,000 units from the last reported 592,000 units. July’s gain, though, likely overstates housing market strength, as it has not been matched by strong housing starts.
Sales remain up 31.3% from 2015. A poll from economists had projected single-family homes sales, which amounts for approximately 9.6% of overall home sales, dropping to a rate of 580,000 units in July. Last months’ unexpected increase drove new home sales well above their second-quarter average, directing to sustained momentum in the market for new homes. Residential construction was a small lag on economic growth in the second quarter.
Tightening labor market conditions, which are steadily increasing wages, as well as mortgage rates near historic lows are backing housing. Reports last week displayed groundbreaking on single-family housing projects advancing to a five-month high in July and sentiment among homebuilders gaining in August. New home sales are likely benefiting from a lingering shortage of previously owned houses available for sale.
Next, new single-family homes sales hiked 40% in the Northeast region and gained 1.2% in the Midwest. Sales in the South also advanced 18.1% to their highest level in almost 9 years. Sales were ironed in the West, which has displayed steep increases in home prices among tight inventories. At July’s sales pace it would take approximately 4 months to clear the supply of houses on the market, the fewest since June 2013, and declined from 4.9 months in June. Though increased demand and tight inventories, the average price for a new home dropped 0.5 percent from a year ago to $294,600.