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New Home Sales Pick Up

New Home Sales Pick Up

Michael Jensen, Mortgage and Finance Guru
, Mortgage and Finance Guru

In our effort to cover important trends that affect the mortgage market, FREEandCLEAR keeps a close eye on new home sales, which is the number of newly constructed housing units that are sold in a month.  The new home sales figure is reported separately from the existing home sales figure, which is the number of previously constructed homes that are sold in a month.  The new home sales market is smaller than the existing home sales market but it is still an important indicator for the real estate and mortgage markets.  In addition to reporting the number of housing units sold, the new home sales report also includes information on the supply of units for sale as wells as the median and average new home sales price.  The new home sales report, issued on a monthly basis, includes statistics for the prior month.

The May new home sales report showed that new home sales bounced back in April after a disappointing March.  New home sales increased 6.8% in April to 517,00 annualized units, as compared to a 11.4% decline in March.  The April new home sales figure fell within the top half of industry analyst expectations and builds upon an incredibly strong May housing starts report to show growing momentum in the new home market.  The increase in demand for new homes boosted prices with the April median new home sales price increasing 4.1% on a monthly basis and 8.3% on a year-over-year basis to $297,300.  Although the number of new homes available for sale increased modestly to 205,000, a greater increase in sales caused supply as compared to monthly sales to drop from 5.1 months in March to 4.8 months in April.  Sales in the South, the largest housing region, jumped 5.8% in April as compared to a 11.8% decline in March.  This is the fourth positive new home sales report in the past five months indicating that the market is moving in the right direction more consistently than in the past.  (Source: Bloomberg)

What it Means for Mortgage Borrowers

The May new home sales report coupled with the May housing starts report suggests that buyer attention is shifting to the new home market.  The increased demand for new homes appears to be coming at the expense of the existing home sales market, which saw a disappointing result for May.  Growing demand for new homes should give home builders and developers more confidence to bring new housing supply to the market which is positive news for prospective home buyers.  Borrowers should monitor housing prices which continue to creep up in the new home segment although future increases in inventory could help offset pricing pressure.  Strong activity in the new home market shows that qualified buyers are able to obtain mortgages.  If you are thinking about buying a new home, use our Mortgage Selector Calculator to determine what size mortgage you can afford and the mortgage program that is right for you.  You should also review our Mortgage Expert Insight on the Differences Between Buying a New and Existing Home for helpful tips.

The FREEandCLEAR Mortgage Expert

www.freeandclear.com

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About the author

Michael Jensen, Mortgage and Finance Guru

Michael is the co-founder of FREEandCLEAR. Michael possesses extensive knowledge about mortgages and finance and has been writing about mortgages for nearly a decade. His work has been featured in leading national and industry publications. More about Michael

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