Ahead of the Bell: US new home sales likely ticked up
WASHINGTON (AP) — The Commerce Department reports on sales of new homes in August at 10 a.m. Eastern on Thursday.
SMALL INCREASE EXPECTED: Economists forecast that new-home sales rose 1.6 percent last month to a seasonally adjusted annual rate of 515,000, according to a survey by data firm FactSet.
In July, new home sales jumped 5.4 percent to 507,000, reversing a sharp drop the previous month.
NEW HOME SALES JUMP THIS YEAR: Steady job gains in the past three years have finally begun pushing up sales of new homes, which were hammered during the Great Recession. Nearly 3 million more Americans have found jobs in the past year and mortgage rates remain low by historical standards. New home sales have soared 25.8 percent in the past year.
Further improvement in new home construction and sales could accelerate economic growth. That's because they generate more construction jobs, demand for more building materials and more spending on landscaping and other services.
Federal Reserve Chair Janet Yellen said last week that she expects the housing market to keep improving as more people find jobs and younger Americans increasingly move out on their own.
"We are envisioning further improvement in the housing market," Yellen said. "It remains very depressed."
Right now, however, potential buyers are facing fewer choices than would normally be the case. There were just 218,000 new homes for sale at the end of July, enough to last 5.2 months at the current pace of sales. That's below the six months that is more common historically.
The limited supply of new homes is also pushing up prices. The median price of a new home has risen 2 percent in the past 12 months to $285,900.
A similar dynamic exists with existing homes, where the supply is also equivalent to 5.2 months of sales. That has pushed up existing home prices 4.7 percent in the past year to $228,700.
Still, low mortgage rates are keeping home purchases affordable for many would-be buyers. The rate for a 30-year fixed mortgage averaged just 3.9 percent nationwide last week, according to mortgage buyer Freddie Mac, far below historical norms.