July new homes sales rose 5.4
percent from June and 25.8 percent from July 2014, joining other improving
housing market indicators. The increase brings annual new home sales to
507,000, or just over half way back to a normal year. New home sales are
greatly dependent on existing home sales since three-quarters or more of new
homes are purchased by existing home owners. In turn, existing home owners are
becoming more willing and able to sell their homes as equity positions improve
and the employment market grows and provides more security that employment will
continue.
Median new home prices increased 2
percent from July 2014 and average prices increased 4.8 percent. Actual sale
prices have increased because the composition of homes sold has shift away from
starter or first time buyer homes and towards move-up buyers. At the same time,
builders are facing higher costs for labor and lots. That trend will continue
as the home building industry continues to expand and must pay higher prices
for the resources needed. Material costs have remained calm as the world
economy slows and demand from other markets have cooled.
New home inventories increased in
July to 218,000, the highest level in more than five years (March 2010). The
continued expansion of new homes for sale is another confirming sign that
builders expect the sales market to continue it improvement just as they
expressed in the NAHB/Wells Fargo Housing Market Index.
Inventories of existing homes however
have not improved significantly for several years. More existing homes on the
market will help feed the first time home buyer delayed demand as well as free
up current home owners to buy a new home.
