The numbers: U.S. new home sales surged 28.8% to a seasonally-adjusted annual rate of 685,000 in August, from a revised 532,000 in the prior month, the Commerce Department reported Tuesday.
That’s the second-biggest jump on record for new home sales. The pace of sales is a sharp reversal of a drop of 8.6% in July.
Yet the sales of new homes are still below a peak of 1.04 million in August 2020.
Analysts polled by the Wall Street Journal had forecast new home sales to come in at 500,000 in August.
Year-over-year, new home sales are still down by 0.1%.
New home sales fell a revised 8.6% to 532,000 in July, compared with the initial estimate of a 12.6% drop to 511,000.
The new home sales data are volatile month-on-month and are often revised.
Key details: The median sales price of new homes sold in August was $436,800, down from the record $458,200 in April.
The supply of new homes for sale dropped by 22.1% between July and August, equating to a 8.1-month supply.
Regionally, sales of new homes rose in all regions, led by the Northeast which saw a 66.7% surge in sales.
Big picture: The gain might reflect homebuyers rushing to complete purchases before mortgage rates move any higher.
Even if rates are inching towards 7%, uncertainty about a worsening macroeconomic environment is pushing people to act, instead of hoping for prices to fall before jumping in.
For instance, mortgage applications had increased last week, as buyers seem to worry about rates rising even further in the coming weeks and months.
What are they saying? Most economists are writing off the jump in sales in August as an anomaly.
“We don’t expect the August pace of sales to be sustained in the months ahead, as the latest rise in mortgage rates will take an added toll on homebuying affordability,” Nancy Vanden Houten, lead U.S. economist at Oxford Economics, wrote in a note. “Further price declines may bring in buyers, however, keeping a floor under activity.”
The new home sales data in August is “an outlier due to a brief and now ended retreat for mortgage rates,” Robert Dietz, chief economist at the National Association of Home Builders, said in a tweet. He added that new home sales are down more than 14% year-to-date, and that sales will likely be lower in September, as rates increase further.
“Don’t believe the sales jump,” Ian Shepherdson, chief economist at Pantheon Macroeconomics, wrote in a note. “The leap in new home sales is either unbelievable – the margin of error in these numbers is massive, +/-18.3% – or unsustainable, if it reflects a rush of purchases by people who locked in rates as they began to surge again.” Added that the trend for sales is still downwards.
Market reaction: The Dow Jones Industrial Average
and the S&P 500
were up in early trading on Tuesday. The yield on the 10-year Treasury note
rose above 3.8%.