Surge of new home sales in the US due to demand outpacing supply

Taylor Scott International News

New home sales in the United States surged in April and they are selling quickly as not enough are being built to meet demand. Specifically, new home sales rose 26% from one year ago in April to an annualised pace of 517,000 annualised pace, the third highest monthly activity in eight years, according to data from the National Association of Realtors. The data also shows that the median price was $297,300, which is 8.3% above last year’s price and on average it took four months to find a buyer. The gap between new home price and existing home price still remains very wide, however, and according to Lawrence Yun, Nar chief economist, it implies that existing homes provide a relatively better bargain in relation to newly constructed homes. ‘Even though new home sales are rising strongly in percentage terms, they are only at about half the activity as during the bubble years nearly a decade ago. This implies, first, that today’s strong activity is not likely to be a bubble. Second, there is more room to grow,’ Yun explained. He also pointed out that the median number of months to find a buyer of new homes remains near historic lows. ‘Given the low supply of both existing and new home inventory, as evidenced by low months supply of inventory, there is zero concern over any over production,’ he said. For the year as a whole, new home sales are projected to rise by about 30% in 2015 and then another 20% to 25% in 2016. ‘It’s a good time to be a home builder. If only the banks would make more construction loans or, depending upon your point of view, if there were less financial regulations to permit banks to make more construction loans,’ Yun added. Continue reading →

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