An Unexpected Surge in New Home Sales

By Ryan Dosen

 

The sale of new homes took a giant step forward to pre-recession levels in August. The rise in new home sales was well ahead of almost all experts’ expectations and it provides yet another good sign for our slowly improving real estate market.

 

New home sales climb quickly

The U.S. Commerce Department reported earlier this week that American new home sales rose an astounding 18 percent in August to an annualized pace of 504,000 units. This is the highest pace our housing market has seen since May of 2008.

A Bloomberg survey of 74 economists produced a median forecast of a small increase to an annual rate of 430,000 units, with estimates ranging only as high as 455,000 units.

Also interesting is the Commerce Department’s revelation that the median sales price of a new home climbed 8 percent from August 2013 to its current level of $275,600.

Basically, more people are buying more expensive and nicer new homes. The loosening of America’s purse strings and willingness to take out loans to purchase nicer and more expensive homes speaks to increased consumer confidence, a key factor when monitoring the real estate market. As confidence rises, people generally buy more homes.

 

Boost in consumer sentiment is a good housing indicator

Improving consumer sentiment was confirmed earlier this week by the Preliminary University of Michigan Consumer Sentiment for September, which rose another 2.1 points to 84.6, the highest level since July of 2013. This month’s sentiment number also beat Investing.com’s forecast of 83.3.

Doug Short of AdvisorPerspectives.com says that to put the latest consumer sentiment numbers into perspective, since 1978, sentiment is now “1 percent below the average (historical) reading” of 85.1. Short says that “during non-recessionary years the average is 87.4 (and the) average during the five recessions is 69.3. So, the latest sentiment number puts us 15.3 points above the average recession mindset and 2.8 points below the non-recession average.” This is great news. We’ve almost clawed our way back normalcy.

 

Looking ahead to a strong finish

One interesting fact about home sales numbers is that existing home sales are calculated as of the date of closing, while new home sales are calculated based upon the date when the contract is signed. So, if you have a great month of existing home sales, it means that all that exciting activity happened two or three months ago. Last month’s fantastic new home sales numbers reflect what consumers were doing just a few weeks ago. In this way, new home sales numbers can sometimes actually be a better indication of today’s home purchasing climate.

In short, America’s consumer sentiment numbers continue their general upward trend, pointing us toward a healthier economy, a better real estate market, and what should be a strong finish to this somewhat-disappointing, winter-weather-burdened year.

 

— Ryan Dosen manages The Wayne Megill Real Estate Team of Keller Williams Brandywine Valley in West Chester. Contact Ryan Dosen for buyer or seller representation or for more perspective on the local and national real estate market by emailing rdosen@megillhomes.com or calling 610-399-0338. Please also visit The Wayne Megill Team blog at www.PAHomesAndRealEstate.com.

 

This article was published by 21st Century Media and the Daily Local News (West Chester, PA). To read this article on the the newspaper’s site, please visit the Daily Local News.

 

To view all of Ryan Dosen’s 21st Century Media real estate columns, visit http://www.dailylocal.com/search?text=dosen.