Sales of New Homes Rise to 5-Year High as Prices Soar

newly built home sales economy real estate housing market prices economy
Mike Groll/AP
By Lucia Mutikani

WASHINGTON -- Sales of new U.S. single-family homes vaulted to a five-year high in June, showing little signs of slowing in the face of higher mortgage rates.

The Commerce Department said Wednesday sales increased 8.3 percent to a seasonally adjusted annual rate of 497,000 units, the highest level since May 2008.

Sales increased 1.3 percent in May.

Economists polled by Reuters had expected new home sales to rise to a 482,000-unit rate last month.

Compared with June last year, sales were up 38.1 percent, the largest increase since January 1992.

The third straight month of gains in new home sales, which are measured when contracts are signed, suggested the housing market was gaining more muscle and should allay concerns that higher mortgage rates could slow down momentum.

Mortgage rates have spiked in anticipation of the U.S. Federal Reserve starting to taper its generous monetary stimulus later this year. Rates still remain low and Fed Chairman Ben Bernanke last week expressed optimism the housing market recovery would continue.

Last month, the inventory of new homes on the market increased 1.3 percent to 161,000, the highest since August 2011, as builders continue to ramp up production to meet the growing demand.

Still, supply remains tight, putting upward pressure on prices. The median new home price increased 7.4 percent from a year ago.

At June's sales pace it would take 3.9 months to clear the houses on the market, down from 4.2 months in May. A supply of 6.0 months is normally considered as a healthy balance between supply and demand.

Sales last month rose in three regions, but fell in the Midwest.

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People are funny there like herds of cattle, if the trend is buying houses because the can brag that they got a low interest rate, thats what they do. Not to mention they paid 30% to 40% more that the house is worth. Better they paid $200,000.00 with a 81/2% rate than $375,000.00 with a 3.25% rate just do the math.

July 24 2013 at 12:18 PM Report abuse +1 rate up rate down Reply
Ralph Wetzel

That's also cause of the free money being printed, is gotta go somewhere. I think there running out of places, don't won't to manipulate to many different areas of the markets or it all comes crashing down, which is going to happen anyways.

July 24 2013 at 12:01 PM Report abuse +2 rate up rate down Reply