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US New Home Sales Surge 18% in August

H.S. Borji
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The sale of new US homes surged in August, raising optimism the housing recovery was gathering momentum in the third quarter following a series of mixed reports.

New US home sales rose 18 percent in August to a seasonally adjusted annual rate of 504,000, following a gain of 1.9 percent that was initially reported as a decline, the Commerce Department reported today in Washington. A median estimate of economists called for a gain to 430,000. New home sales had risen to 427,000 in July, up from an initial estimate of 412,000.

The August gain sent new house prices to their highest level in more than six years, official data showed. It was also the biggest single-month gain since 1992.

Compared to August 2013, new home sales were up a staggering 33 percent.

The median sale price of a new home in June was $275,600, while the average sales price was $347,900.

On a seasonally adjusted basis, there were 203,000 new homes for sale at the end of August. At the current sales rate, this represents a supply of 4.8 months.

New home sales were up in three of the four US regions, official data showed. Sales in the West surged 50 percent from July. Year-on-year, sales in the West were up 84.3 percent. Sales in the Northeast increased 29.2 percent from the previous month. Year-on-year, sales in the Northeast were down 3.1 percent. New home sales increased 7.8 percent in the South, translating into an annualized gain of 27.2 percent.

Sales growth was flat in the Midwest, the Commerce Department said.

The pricier new residential housing market was under pressure for most of the year as higher house prices, rising mortgage rates and stagnant wages kept buyer interest at a minimum. The new residential housing market accounts for roughly ten percent of all home purchase in the United States, and is typically more volatile than the previously-owned housing market.

The latest batches of housing data paint a mixed picture on the housing recovery. Existing home sales declined 1.8 percent in August to a seasonally adjusted annual rate of 5.05 million, the National Association of Realtors reported on Monday. Economists forecast a gain of 1 percent to 5.2 million.

Inventories fell 1.7 percent to 2.31 million. At the current sales pace, it would take five-and-a-half months to clear existing inventories.

According to NAR chief economist Lawrence Yun, the market for existing homes is likely to pick up so long as job growth remains positive.

Separately, the Commerce Department said last week housing starts and building permits tumbled sharply in August. Groundbreaking fell 14.4 percent to a seasonally adjusted annual rate of 956,000, while authorizations for new construction projects declined 5.6 percent to 998,000.

On balance, however, the housing market appears to be headed in the right direction. Homebuilder confidence is at multi-year highs, led by a broad pick up in buyer traffic throughout the United States. The National Association of Homebuilders’ housing market index rose 4 points to 59 this month, exceeding forecasts.

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