New Home Sales Surge 12.4% in July to Highest Level Since October 2007

The Commerce Department reported on Tuesday new single-family homes sales in the U.S. surged 12.4% last month to an annualized rate of 654,000 units. The report topped expectations, as Wall Street was expecting 580,000 units.

The annual rate was at the highest level since October 2007, though new home sales in June were revised down to 582,000 units from the previously reported 592,000 units. Single-family home sales, which account for about 9.6 percent of overall home sales, are likely exaggerating the health and strength of the housing market. Housing starts are weak despite sales being up 31.3% from a year ago.

New single-family homes sales shot up by 40.0% in the Northeast and ticked up slighty by 1.2% in the Midwest. Sales in the populous South also surged 18.1%, the highest level since July 2007. However, new home sales were flat in the West during the month of July, where home prices have increased more than the national average amid tight inventories.

In July, the inventory of new homes on the market actually declined 2.9% to 233,000 units, the lowest level since November 2015. Builders must greatly increase new home construction in order to meet demand, though that’s not expected or likely. At July’s sales pace it would take just 4.3 months to move through the supply of houses on the market, the shortest period June 2013 and a decline from 4.9 months in June.

The median price for a new home declined 0.5% on a year-over-year basis to $294,600.