The housing market is hot and getting hotter. New home construction is seeing its highest sales in over eight years with 592,000 new homes sold in June of 2016. This is the highest level of sales since February of 2008. This also marks a four percent increase from May’s home sales and a whopping 25 percent increase from just last year at this time.
The increase in home sales isn’t happening uniformly across the nation, however. While the Midwest and the West saw soaring sales (jumping 10.4 percent and 10.9 percent respectively), sales actually fell in the northeast by 5.6 percent. Still, the nationwide numbers continue to climb.
Why Are New Home Sales Increasing?
With the unemployment rate currently at 4.9 percent, a solid job market is certainly helping the housing market. Employers hired 287,000 workers in June, which is an increase from the slipping numbers in April and May.
Mortgage rates are also staying low - lower than anyone expected - at an average of 3.45 percent for prime buyers on conventional 30-year loans. Last year at this time, mortgage rates were at 4.04. VA loans, FHA loans, and USDA loans are even lower than the average.
On top of a rising job market and low mortgage rates, mortgage lenders are also making the qualifications for first-time home buyers easier to meet. Fannie Mae is helping with this trend by recently adding the 3 percent down HomeReady mortgage program to currently available loans, which already includes low and no-down payment options.
Purchase mortgage applications are once again being approved at high rates. In fact, they’re being approved at the highest rate since the start of this decade.
New Home Builders
New home builders are understandably feeling confident, according to results from the Housing Market Index (HMI), a monthly homebuilder confidence survey recently released by the National Association of Homebuilders. The HMI shows confidence levels of new home builders at their highest points in ten years. Many home builders are expecting their sales for this year to be near multi-year bests.
In fact, homes are even being purchased faster than new home builders can even build them in some areas. New home builders are actually finding it difficult to secure land and workers to keep up with the demand for new homes. Even so, the number of construction workers continues to rise with 217,000 new construction jobs created in the past 12 months.
As expected, the increase in sales is causing the supply of new homes to begin to dwindle. The current stock of homes available for sale is sitting at 4.9 months, meaning that all current newly built homes will be sold out by the end of the year. The stock is shrinking, as the stock had a shelf life of 5.1 months just a month before in May.
This trend of a limited stock has held for the last 55 of 56 months, which is pushing housing prices up bit by bit. In fact, home values are up 35% nationwide since 2012 with the median price rising 6.1 percent from just a year ago to now be $306,700. However, because of low mortgage rates, people are still able to afford new homes.
Your New Home
If you’re in the market for a new home, expect to act fast. Be smart - but quick - with your research. Walk through model homes, tour new home communities, and make a list of must-haves. Then find a good new home builder such as Legend Homes or Princeton Classic Homes to help build the home that is the perfect match for you!