New-home sales jump 13.8% in June

WASHINGTON — Sales of new homes rose a sharp 13.8% in June, the second straight increase after two months when sales plunged as the country went into lockdown because of the coronavirus.

The Commerce Department

reported Friday that the June gain pushed sales to a seasonally adjusted annual rate of 776,000, a better-thanexpected performance. The increase follows a 19.4% jump in May.

The two months of gains followed sharp declines in March and April.

A separate report Wednesday showed sales of previously owned homes surged 20.7% in June to a seasonally adjusted annual rate of 4.72 million. Even with the gain, which followed three months of declines, new-home sales remain roughly 20% below pre-pandemic levels.

“Housing is the strongest major sector of the economy,” Ian Shepherdson, chief economist at Pantheon Macroeconomics

Ltd., wrote in a note. Falling mortgage rates are “more than offsetting the wave of Covid-induced job losses.”

“Expect home builders’ sentiment and housing construction activity to rebound further,” he added.

The median price of a new home sold in June increased to $329,200, up 5.6% from a year ago.

Economists are hoping for a further rebound in sales in coming months but caution that this depends heavily on the course of the coronavirus. A recent resurgence in cases has caused some states to roll back their reopening plans.

Sales are being helped by ultra-low mortgage rates, which

earlier this month dropped below 3% for a 30-year fixed-rate mortgage for the first time in nearly 50 years.

Economists believe low rates and changes in home preferences brought on by the pandemic will combine to support further sales gains this year.

“Home sales are being supported by households’ shifting preference for bigger spaces as more and more people work from home as well as lower mortgage rates,”

said Rubeela Farooqi, chief U.S. economist at High Frequency Economics.

A growing number of homebuyers are choosing to buy new because the existinghome market is so tight.

In June, sales were up in all parts of the country, with the biggest gain coming in the Northeast, a surge of 89.7%. Sales rose 18% in the West, 10.5% in the Midwest and 7.2% in the South.

“We are very encouraged by the fact that the momentum of this dramatic recovery continues, as demand has remained strong through the first few weeks of July,”

Ryan Marshall, chief executive officer at home construction company PulteGroup Inc., said on an earnings call Thursday.

The supply of new homes at the current sales pace fell to 4.7 months, an almost fouryear low. The report also showed signs that builder backlogs are growing; the number of properties sold for which construction hadn’t yet started climbed to 233,000, the most since November 2017.

New homes account for about 10% of all purchases and are considered a more timely barometer than sales

of previously owned properties, which are calculated when contracts close.

The government’s newhome sales data are volatile and have a wide margin of error. There’s a 90% chance that the monthly percentage change was between a 4% decline and a 31.6% increase, according to the U.S. Census Bureau. The report is published jointly by that agency and the Department of Housing and Urban Development.