New home sales advance in August
|Summary
Sales Improve Despite Supply Headwinds
New home sales rose 1.5% to a 740,000-unit pace during August. The modest pick-up in sales continues to show that underlying demand for homes remains strong. The slight pull-back in sales experienced this spring and early summer likely had more to do with builders struggling to build enough homes to show prospective buyers. It is challenging to sell a home when you are unable to tell a buyer when that home will be completed. Lumber prices have come down from the exorbitant levels seen this spring. Other key building materials, however, remain in short supply, which is delaying new starts and preventing projects from wrapping up. An uptick in the already lofty NAHB/Wells Fargo Housing Market Index (HMI) for the month of September, which was released separately this week, provides addition evidence that builders are still overwhelmingly optimistic, even with supply-side headwinds.
Sales of New Homes Strengthen in August
- The 740,000 unit pace registered during the month is the fastest since April. Sales have cooled down compared to the feverish pace seen in late 2020 and early 2021. Despite some moderation recently, the overall pace of sales is still very strong relative to before the pandemic. For context, there were 683,000 new homes sold in 2019.
- Revisions show sales were significantly stronger than first reported in July, with sales increasing 6.4% during the month.
- Sales would likely be even stronger if builders were able to procure the parts and labor needed to complete single-family projects. The number of homes sold that have not been started yet rose to 263,000 during the month. Meanwhile, sales of completed homes fell 14% to 166,000 units.
- Inventory levels improved again in August. The number of homes for sale at the end of the month rose 3.3% to 378,000. Much of the inventory gain, however, was in homes that have not been started or homes that are still under construction.
- Prices are still rising rapidly. On a year-over-year basis, the median new home price rose 20.1% to $390,900 in August. This translates to an increase of $65,400 over the past year.
- Sales jumped 26.1% in the Northeast during the month, while the Midwest saw a 31.1% decline. The West and South rose 1.4% and 6.0%, respectively.
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