Sales of new homes in the United States jumped 13.8 percent compared with May as home buyers took advantage of record-low mortgage rates and fled city centers beset with anti-police protests, riots, looting, crime, shootings, stay-at-home orders, shuttered businesses, closed schools, and a loss of amenities such as restaurants, theaters, and museums.
Americans purchased new homes at a seasonally adjusted annual rate of 776,000, the Commerce Department said Friday.This was the highest sales rate since 2007. Sales were up in all four regions of the country.
The rise was not merely a reflection of a rebound from the pandemic lockdowns that shut down a lot of new home construction and home buying this spring. Compared with a year ago, sales were up 6.9 percent.
Economists had predicted sales to rise by 4 percent to an annual rate of 700,000.
The median sales price of new houses sold in June 2020 was $329,200. The average sales price was $384,700.
Sales of new homes are just a small part of the U.S. housing market but they have an outsized economic impact because homebuilding is labor-intensive and employs workers with a wide range of skill levels. New homes also must be furnished and fitted with appliances, driving up sales of a variety of consumer goods.
The shutdown may have led to some pent up demand, leading sales higher. In addition, many city-dwellers now see suburban life more attractive because so many cities have shutdown restaurants, bars, theaters, museums, and other cultural and commercial amenities that made urban life desirable. Parents are also seeking out school districts where schools may open full-time rather than continue the virtual learning that marked the end of the last school year and seems likely for many city schools this fall.
The stay-at-home orders also highlighted the confining features of apartment life. A house with a yard and more square feet is all the more valuable for families forced out of public spaces. What’s more, the riots, looting, a rise in shootings, and anti-police protests have brought renewed attention to crime and other dangers of city life. Traveling by car is seen as safer than mass transportation in a pandemic era. And the dangers of contracting the virus are likely lower in areas with lower population density.
Working from home is likely also causing many buyers to consider living outside of cities. Suburban homes have more room for home offices and commuting is less of an inconvenience when workers are going into office less frequently or staying home most of the time.
Sales in the Northeast, the smallest market for new homes, were up 89.7 percent compared with May and 111.5 percent compared with a year ago. In the Midwest, sales climbed 10.5 percent for the month and 33.3 percent for the year. In the West, sales rose 18 percent on a monthly basis and 4.1 percent compared with the prior year. In the South, the largest market for new homes, sales rose 7.2 percent and were down 1.8 percent compared with a year ago.
New home sales are counted when the contract is signed, typically a month or two before the sale closes. Existing home sales are reported at closing. So new home sales have seen a stronger recovery on an annual basis in June. But the strength of new home sales, as well as data on demand for mortgages, indicates that there will likely be an acceleration of existing home sales this summer. Homebuilding is also likely to pick up pace as the builders rush to re-up the supply of houses after the number of new homes available for sale plunged 7.0 percent on an annual basis in June.