New home sales leap to highest in nearly 14 years as market thrives on low mortgage rates

  • US new home sales soared 13.9% in July to a seasonally adjusted annual rate of 901,000 units, the highest level since December 2006, according to a Tuesday release from the US Census Bureau.
  • The median sales price jumped 7.2% from the year-ago period to $US330,600.
  • Sales spiked by 58.8% in the Midwest and shrank by 23.1% in the Northeast.
  • The nation’s housing market has been bolstered in recent months by record-low borrowing costs and strong construction activity.
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Sales of new homes in the US soared to their highest level since December 2006 in July as Americans took advantage of historically low interest rates.

Single-family home sales leaped 13.9% to a seasonally adjusted annual rate of 901,000 units, according to data released by the US Census Bureau on Tuesday. Median sales price gained 7.2% to $US330,600 from the year-ago period.

Economists surveyed by Bloomberg expected a rate of 790,000 sales.

The seasonally adjusted estimate for new houses for sale at the end of the month was 299,000, according to the Census Bureau. That level represents a four-month supply of homes should the sales rate hold steady.

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Sales jumped the most in the Midwest, soaring 58.8% to 127,000 units. Home sales shrank in the Northeast by 23.1% to 40,000 units.

The summer sales boom was largely fuelled by low borrowing costs and a lack of listings for existing homes. Mortgage rates sank through July before hitting record lows in early August. Surging homebuilding activity further fuelled the spree, but July’s rate is likely unsustainable and could cave to a weakened economic backdrop, Oxford Economics said in a note.

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“While strong demand and lower mortgage rates are supportive of further growth in sales, the slow recovery and weak labour market pose downside risks,” the firm said.

The better-than-expected data follows a similarly positive report on existing home sales. Sales of previously owned homes spiked a record 24.7% to a seasonally adjusted rate of 5.86 million last month, according to a Friday release from the National Association of Realtors. Economists anticipated a 5.41 million rate.

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