July New Home Sales: Build it and They will Come

• 708,000 (SAAR) newly built homes were sold in July, up 1% from June but down 27.2% from a year ago, according to the U.S. Census Bureau.
• The  median sales price of new houses sold in July was $390,500, up 18.4% year-over-year.
• The seasonally‐adjusted estimate of  new houses available for sale at the end of July was 367,000.

Builders continue to face significant challenges finding and affording key materials, land and labor -- and still, new home sales crept up in July from June, the first monthly gain since March and further proof that in this market, if home builders can find a way to build new homes, consumers will still come for them. The supply constraints that have limited homebuilder activity for months remain as strict as ever, and builders can have a tough time penciling out project finances when critical supplies including appliances and building materials are unavailable or unaffordable. And while gauges of homebuilder confidence remain very high, they have also steadily declined over the last several months. But amid these supply-side difficulties, demand for new homes remains very strong. Mortgage interest rates still sit near all-time lows, despite numerous sources of pressure that might otherwise push them higher, providing affordability benefits for those buyers who can afford a down payment on a house and qualify for a loan. And despite increasing in recent months, the overall number of available homes for sale is still very low and new construction remains a favorable option for many home shoppers. Lastly, builders are continuing to list a higher-than-usual share of homes, even if construction hasn’t even begun -- more than a quarter (28.3%) of new homes available for sale in July had yet to begin construction. And a third (33.3%) of new homes sold in July were not yet started -- a signal that construction activity itself is likely to stay strong in coming months, despite difficulties. Challenges for new home construction remain and are unlikely to relent any time soon, but today’s release is the latest indication that demand is enough to overcome the difficulties.