August New Home Sales: A True Bright Spot

• August new home sales totaled 1.01 million (SAAR), up 4.8% from an upwardly revised July figure and 43.2% from August 2019, according to the U.S. Census Bureau.
• The median sales price of new houses sold in August 2020 was $312,800, down 4.3% year-over-year.
• Inventory of new homes fell 3.1% from July and was down 13.2% from August 2019.

This summer’s remarkably strong home sales market, particularly new home sales – more new homes have been sold through August in 2020 than in any year since 2007 -- has been one of the true bright spots in the broader economy. And August's headline new home sales numbers prove the point by themselves -- the last time the market exceeded 1 million sales in a month (at an annualized rate) was in 2006. There’s no question that homebuyer demand remains firm – applications for home purchase loans continue to rise, homebuilder confidence is at record highs and homes are selling at a remarkably fast rate. But questions around the potential durability of this strength may be starting to creep in, because there’s no way to ignore the fact that it comes at a time when already low for-sale inventory just continues to shrink. Inventory fell at its fastest annual rate since 2012 in August, and while homebuilders appear determined to fill the void, volatile lumber prices and logistical difficulties brought upon by the pandemic are making that challenging. Today’s new home sales data was another resounding win for a soaring market, but it does offer some hints of the potential headwinds to come.