The South once again led the nation with a 13.4% gain against July volume — and a 50% spike compared to August 2019.
By Manuel Gutierrez, Consulting Economist to NKBA
The market for new houses expanded further in August, with sales of new single-family houses up 5%, exceeding an annualized rate of 1 million units for the month. The 26% drop in sales of new homes between January and April of this year has been more than offset by substantial gains during the last three months. The last time there were sales increases of this magnitude was in. 2006..
The 5% increase in August sales was modest compared with the previous two months, when new home sales leapt by 20% and 15%, respectively. Still, new home sales in the last three months was higher than it had been at any period in the past two years. In fact, August 2020 sales were 43% higher than they had been the previous year.
Unlike the existing homes category, where greater sales are often hindered by a fixed inventory of houses on the market, home builders can react to stronger demand by simply building more homes, assuming they have access to the necessary land, labor and materials.
Thus, the number of new homes sold but not yet started has increased dramatically since the partial reopening of the economy around May. While the percentage of “not started” homes had been declining from roughly 35% of all homes sold in 2016, to about 28% by 2019, that percentage has since reversed, up to 34% in August.
Conversely, the percentage of completed new homes sold had been rising over the same four-year period, from approximately 30% in the third quarter of 2016 to nearly 40% at the end of last year. It has since fallen to 29% in August.
The current trend ensures that builders will remain busy in the near future, and also implies increased opportunities for those in the kitchen and bath remodeling industry.
On a regional basis, the primary driver of rising new-home sales last month was the 13.4% gain in the South over the previous month (and 50% jump vs. the previous year), where sales reached 636,000 units. Since the South has by far the largest share of sales of new homes of any region, a significant change there greatly affects the national picture. In the West, the second largest housing market, new-home sales remained relatively unchanged compared to the previous month, dropping by 1.7% to 234,000 units. However, similar to the three other regions, sales in the West still increased significantly vs. the prior year.
Despite stronger sales nationally, prices on new housing fell 4.6% in August to a median of $312,800 for all new homes sold. Recent data on regional home prices is not yet available; that’s released on a quarterly basis. Third-quarter data will be available at the end of October.
However, the drop in median house prices for August is likely attributable, at least in part, to the outsized effect of the South, where new home prices are typically 10% below that of the national average.
