Sales of new homes hit nearly nine-year high

Sales of new homes rose in July to their highest level in nearly nine years, a hopeful sign for the improving housing market. 

The Commerce Department said on Tuesday that new home sales jumped 12.4 percent last month to a seasonally adjusted annual rate of 654,000 units last month, up from 582,000 units in June, the best reading since October 2007.

{mosads}”July’s positive report shows there is a need for new single-family homes, buoyed by increased household formation, job gains and attractive mortgage rates,” said Robert Dietz, chief economist for the National Association of Home Builders (NAHB).

“This uptick in demand should translate into increased housing production throughout 2016 and into next year,” Dietz said. 

Sales are 31.3 percent higher than a year ago, a signal that the sector has finally turned the corner in its protracted recovery.

The housing market has gradually improved this year behind strong employment growth and historically low mortgage rates. 

But more robust growth has been held back by rising prices and inventory shortages.

The inventory of new homes for sale was 233,000 in July, which is a 4.3-month supply at the current sales pace, a drop from the 4.9 months in June.

“July’s surge in new home sales continues to support the sentiment that demand for homes is strong despite homebuyers facing low existing inventory,” said Ralph McLaughlin, chief economist for Trulia.

The median sales price of new houses sold was $294,600, down from $310,500 in June. 

Regionally, new home sales rose a robust 40 percent in the Northeast, 18.1 percent in the South, and 1.2 percent in the Midwest. Sales were unchanged in the West.

“This rise in new home sales is consistent with our builders’ reports that market conditions have been improving,” said NAHB Chairman Ed Brady, a homebuilder and developer from Bloomington, Ill.

“As existing home inventory remains flat, we should see more consumers turning to new construction,” Brady said.