New-home sales rose in August, even as buyers continued to weather high home prices. Higher development costs and material prices have put pressure on new-home prices, which are 20% higher than a year ago. The median sales price was $390,900 in August, the Commerce Department reported Friday.
“These price hikes are a risk for housing affordability as we approach the end of the year,” says Robert Dietz, chief economist at the National Association of Home Builders.
Still, low mortgage rates and fewer existing homes for sale are leading to an increase in new home sales. Sales of newly built, single-family homes in August increased 1.5% to a 740,000 seasonally adjusted annual rate compared to July, the Commerce Department reports. Sales are up 2.4% compared to a year earlier.
“New-home sales stabilized in late summer following a cooling trend that took hold last winter,” says Chuck Fowke, NAHB’s chairman. “Builder sentiment remains strong and housing demand is being supported by ongoing low mortgage interest rates and a shortage of existing home inventory.”
Rising inventory in the new-home market is giving buyers more choices. New-home inventory is at a 6.1-month supply, which is considered balanced for the market. That also is 74.3% higher than a year earlier. Inventory in the new-home market reflects a growing share of homes that have not yet started construction. Twenty-eight percent of the new-home inventory comprises homes in that category.