New home sales pick up the pace on lower mortgage rates
Housing market strongest in a year
Sales of new homes rose in February to the highest level in almost a year as lower mortgage rates enticed buyers.
Single-family new-home sales rose to 667,000, a 4.9% gain from January’s upwardly revised figure of 636,000, according to a report Friday from the Census Bureau and the Department of Housing and Urban Development. The sales pace was the highest since March 2018, according to government data that tabulates signed contracts. The median sales price fell 3.6% from a year earlier to $315,300.
Sales of new homes are considered a leading indicator of the spring market because it can take builders about six months to finish houses and families who want to move before the start of the school year in September have to sign contracts earlier than existing homebuyers. Purchases of new homes rose in three regions of the country and remained stable in the fourth. Sales in the South rose to the highest level in more than a year, while the Northeast was the highest in eight months, the Midwest was a five-month high, and the West matched the prior month.
The supply of new homes for sale was 6.1 months, seasonally adjusted, meaning it would take that long to sell the existing stock. Economists consider a six-month supply to be a balanced market.
Sales of new homes during the first two months of 2019 are 2.8% higher than a year ago, noted Robert Dietz, chief economist for the National Association of Home Builders.
“With the decline in mortgage rates, we’ve got the stage set for additional volume growth in the months ahead,” said Dietz.
Mortgage rates have tumbled since the end of 2018 as economic turmoil in Europe caused international money managers to seek U.S. dollar-denominated assets. British politicians are trying to work out an alternative to a “hard Brexit,” meaning a U.K. exit from the European Union without trade agreements in place. The ensuing “flight to safety” among investors is causing bond investors to settle for smaller yields, which translates into lower rates for homebuyers, said Mark Goldman, a mortgage broker with C2 Financial in San Diego.
“London is a very important banking center, and there are a lot of investors who are asking themselves, `Where can I park my money until I find out which way the wind is blowing?’” said Goldman.
The average U.S. rate for a 30-year fixed mortgage was 4.06% last week, Freddie Mac said yesterday. It dropped 22 basis points from the prior week, the largest weekly decline in a decade, the mortgage financier said. Mortgage rates at their lowest point since January 2018. One year ago, mortgage rates averaged 4.4%.