Rising mortgage rates are showing no sign of derailing new-home sales. Single-family new-home sales rose 8.3 percent in June to the highest level since May 2008, the Commerce Department reported Wednesday. What’s more, they were up 38.1 percent compared to June of last year — the largest year-over-year increase since January 1992.
With mortgage rates on the rise in recent weeks, some analysts have been concerned that home sales would slow. But “the recent increase in mortgage rates hasn’t slowed demand as long as home affordability remains high,” Bob Walters, chief economist at Quicken Loans in Detroit, told Reuters. “We are, however, seeing an increased urgency from potential new home buyers as they move to secure today’s historically low rates.”
The inventory of new homes for sale in June fell to a “razor thin” 3.9-monthy supply, the National Association of Home Builders noted. The low supply is pushing up home prices: National median new-home prices rose 7.4 percent in June compared to a year ago.
“New-home buyers are returning to the market in larger numbers as firming prices, shrinking inventories of homes for sale, and improving local economies convince them that now is the time to make their move,” says Rick Judson, chairman of NAHB. “Meanwhile, the very low supply of new homes on the market is indicative of the difficulty that builders are having in keeping up with demand due to availability issues with regard to materials, credit, labor, and lots for development.”
Regionally, the Northeast saw new-home sales in June rise 18.5 percent; the West gained 13.8 percent; and the South gained 10.9 percent. The Midwest was the only region that posted a decline in new-home sales in June, falling 11.8 percent.