New home sales in the United States increased 13.8 percent compared to May, as home buyers took advantage of record low mortgage rates and fled urban centers plagued by police protests, riot, looting, crime, shootings, orders to stay home, businesses closed, schools closed and a loss of services such as restaurants, theaters and museums.
Americans bought new homes at a seasonally adjusted annual rate of 776,000, the Commerce Department said on Friday. This was the highest sales rate since 2007. Sales increased in all four regions of the country.
The increase was not simply a reflection of a pickup in pandemic blockades that closed many new home construction and home purchases in the spring. Compared to a year ago, sales increased 6.9 percent.
Economists had forecast that sales would increase 4 percent at an annual rate of 700,000.
The median sale price of new homes sold in June 2020 was $ 329,200. The average sale price was $ 384,700.
New home sales are only a small part of the US property market, but they have a tremendous economic impact because home construction is labor intensive and employs workers with a wide range of skill levels. New homes must also be furnished and equipped with appliances, increasing sales of a variety of consumer goods.
The shutdown may have led to some pent-up demand, leading to higher sales. Furthermore, many city dwellers now see suburban life as more attractive because many cities have closed restaurants, bars, theaters, museums and other cultural and commercial services that made urban life desirable. Parents are also looking for school districts where schools can open full time instead of continuing the virtual learning that marked the end of the last school year and seems likely for many city schools this fall.
The orders to stay home also highlighted the limiting characteristics of apartment living. A house with a patio and more square feet is even more valuable for families forced to abandon public spaces. In addition, riots, looting, increased shootings and protests against the police have brought renewed attention to crime and other dangers to life in the city. Traveling by car is considered safer than mass transportation in a pandemic era. And the dangers of contracting the virus are probably less in areas with lower population densities.
Working from home is also likely to cause many shoppers to consider living outside of cities. Suburban homes have more home office space, and commuting is less inconvenient when workers go to the office less frequently or stay home most of the time.
Sales in the Northeast, the smallest market for new homes, increased 89.7 percent compared to May and 111.5 percent compared to the previous year. In the Midwest, sales were up 10.5 percent on the month and 33.3 percent on the year. In the West, sales increased 18 percent monthly and 4.1 percent compared to the previous year. In the South, the largest market for new homes, sales increased 7.2 percent and fell 1.8 percent compared to the previous year.
New home sales are counted when the contract is signed, usually a month or two before the sale closes. Existing home sales are reported at closing. Therefore, new home sales have experienced a stronger annual recovery in June. But the strength of new home sales, as well as mortgage demand data, indicate that there will likely be an acceleration of existing home sales this summer. Home construction is also likely to accelerate as builders rush to further increase home supply after the number of new homes available for sale fell 7.0 percent annually in June.
