Housing appears to be on the way to a V-shaped recovery after the pandemic closings in April.
New home sales peaked at nearly 13 years in June when 776,000 new single-family homes were sold, according to the Census Bureau. That marked the most since July 2007 on a seasonally-adjusted basis.
The pace of sales, driven by historically low interest rates, is a bright spot in an economy that is still struggling to recover during the coronavirus pandemic.
“New home sales rebounded for the second month in a row in June, in line with other real estate market indicators showing strong demand after the pandemic-induced decline in April,” said Joel Kan, associate vice president for economic and industrial forecasting. in the Association of Mortgage Bankers. “Record low mortgage rates and accumulated demand in the spring continue to be the main drivers of the housing market this summer.”
An earlier MBA report showed that mortgage applications increased by more than 20% in June compared to May. (Source: Getty Creative)
The average 30-year fixed-mortgage rate hit 3.01% this week, according to Freddie Mac, a government-sponsored company, slightly above the record low of 2.98% reached last week. These ultra-low rates are luring homeowners to pull the trigger when buying.
An earlier MBA report showed that mortgage applications increased by more than 20% in June compared to May. Year over year, requests increased by 54.1%.
Kan said an increase in home construction will also help boost buyer optimism, as the lack of homes for sale has been a continuing hurdle for buyers, especially new ones.
“We anticipate that the construction of new homes will be accelerated to try to better meet demand,” Kan said in a previous press release. “However, with the low level of homes for sale on the market, the sustainability of the upward trend in home buying activity will depend on supply increasing more rapidly.”
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According to Freddie Mac, almost 2.5 million additional housing units need to make up for this shortage with 29 states suffering from a housing deficit.
The next few weeks will be the true indicator if the property market has returned.
“The accelerated spread of coronavirus across the country and the expiration of key aid programs are two factors that will test the resilience of the housing market and could threaten the recent improvement in home sales,” said Matthew Speakman, economist at Zillow.com, a real estate listing site. “While today’s strong numbers are a good indicator for the market right now, the coming weeks will be key.”
