AFP – Sales of new homes in the United States jumped 13.8 percent in June from the previous month while US home construction increased 17.3 percent over the same period, according to the US Commerce Department.
The June seasonally adjusted annual rate of 776,000 homes sold was well above expectations and 6.9 percent above the same month in 2019, bringing the key sector to a level above where it was before the coronavirus pandemic walloped the world’s largest economy in March.
Analysts said the sector was supported by cheap mortgages following the Federal Reserve’s lowering of its benchmark lending rate in March to 0-0.25 percent, as well as the easing of lockdowns meant to stop the coronavirus.
“Record-low mortgage rates and pent-up demand from the spring continue to be main drivers for the housing market this summer,” Joel Kan of the Mortgage Bankers Association said.
Ian Shepherdson of Pantheon Macroeconomics said home buyers appeared to defy rising coronavirus cases across the US.
“Sales rose across the country in June, despite the emerging second wave of COIVD infections, which started to hit activity in the south in the final third of the month,” he wrote in an analysis.
However Rubeela Farooqi of High Frequency Economics warned that sales in the second quarter ending in June were on average 676,000 annualized, below the 701,000 annualized seen in the first quarter.
And with weekly jobless claim data indicating more than a million people newly filing for unemployment each week, Farooqi warned “ongoing weak labor market conditions could eventually impact households’ ability to purchase homes.”
While for the construction sector it was seasonally adjusted annual rate of 1.186 million, above analysts’ forecasts, however it was down 4.0 percent from June 2019, according to the monthly data report.
The sector had started recovering in May after a steep decline in April, the first full month of business shutdowns to stop the spread of the coronavirus.
Growth in June was seen both in single-family housing starts, which were up 17.2 percent, and in units of five or more, which rose 18.6 percent.
Permits, a sign of demand in the pipeline, grew 2.1 percent from May fueled by single-family authorizations, which rose 11.8 percent while multi-unit permits decline.
However, the number was 2.5 percent below the same month in 2019.
The data “is only a bare, partial recovery,” chief economist of the National Association of Realtors Lawrence Yun said in statement, adding that the United States needs at least 1.5 million new units to satisfy increased demand.
“The housing market is hot. Homebuyers have swiftly moved into the market to take advantage of the unimaginably low mortgage rates. But inventory is lacking with a sizable backlog of buyers getting outbid by others,” Yun said.
However Rubeela Farooqi of High Frequency Economics noted the average for both starts and permits was weaker in the first quarter than the second.
“Beyond a near-term bounce that reflects demand for more space as more and more people work from home, a desire to live in less densely populated areas as well as low mortgage rates, the outlook for housing is likely weak as job and income losses curtail activity,” she said in a note.