After dipping in June, new-home sales took flight in July. Sales were up a whopping 12.4% to 654,000 units on an annualized rate.
Strength was concentrated in two regions – the South and the Northeast. As for the former, the South, sales rose 18.1% to 398,000 units on an annualized rate. As for the Northeast, sales were up a stunning 40%. But because the new-home market is a small market in the Northeast, that works out to only 35,000 units on an annualized rate.
It appears builders further embraced discounting to move inventory. The median price of a new home fell 5.1% to $294,600 in July. The latest price decline moves the year-over-year median price of a new home to negative from positive. Year over year, the median price is down 0.5%.
A dearth of supply could lead builders to throttle back on discounting going forward. Given the pace of sales, new homes on the market fell by 7,000 to 233,000. This caused monthly supply to fall to 4.3 months from 4.9 months in June. (The all-time record was 12.1 months of supply in January 2009.)
The outlook on housing remains positive. When considering sales, prices, new construction from a long-term perspective, we still see a very healthy market. We don’t expect that perspective to change for years to come.
STILL QUIET ON THE MORTGAGE FRONT
We started August with a prediction: We didn’t expect to see much movement in mortgage rates for much of the month. This prediction is looking good.
Mortgage News Daily reports that there are no historical examples of rates holding as steady and as narrow as they have held in August. Rates are about as narrow and as steady as they’ve ever been.
If the employment numbers for August are as strong as those in July (which saw a 255,000 increase in payrolls.) The Federal Reserve could be as motivated as it has been all year to finally move on interest rates.
But then again, global economic growth remains an overarching concern. According to the International Monetary Fund’s (IMF) latest World Economic Outlook released in July, advanced economies will grow only 1.8% in 2016 and 2017, down 0.1% and 0.2%.
Because of this, we wouldn’t be surprised if this narrow range for mortgage rates persists deep into September.