New home sales increased in August to a 552,000 seasonally adjusted annual rate, a 5.7% increase from an upwardly revised July. The August pace was the highest since February 2008. The steady, albeit modest, progression of new home sales reflects improvement for jobs and consumer confidence, with home buyers taking advantage of historically low mortgage rates.
The inventory of homes for sale advanced slightly to 216,000, the highest since April 2010. At the current sales pace, it would take 4.7 months to sell the inventory, which is well below the 30-year historical average of 5.9 months.
In contrast, existing home sales, as reported by the National Association of Realtors, decreased in August after three successive months of growth. Total existing home sales decreased by 4.8% in August to a seasonally adjusted rate of 5.31 million units combined for single-family homes, townhomes, condominiums and co-ops. The August sales pace was 6.2% higher than a year prior. In good news, the first-time home buyer share increased from 28% in July to 32%.
Overall home construction took a breather at the end of the summer, posting a small decline in August. After a downward revision for July, total housing starts declined 3% to a seasonally adjusted annual rate of 1.126 million. The declines were evenly distributed among the single-family and multifamily market segments, with both down 3% for the month and recording starts rates of 739,000 and 387,000 units respectively. Year-over-year, single-family starts were up 14.9% and multifamily gained 19.8%.
However, upticks in permits and builder confidence suggest ongoing, modest growth for the rest of the year. Single-family permits expanded 2.8% in August, while the pace of multifamily permits grew by 4.7%.
Home building’s share of the economy continues to grow. With the release of the final estimates of second-quarter 2015 GDP growth (revised up to a 3.9% growth rate), housing’s share of gross domestic product declined slightly to 15.31%. However, the home building and remodeling component – residential fixed investment – expanded for the third consecutive quarter to 3.21% of the economy.