The sale of US new homes touched a new level in August and it highlighted the upliftment of struggling home market in response to a sharp drop in mortgage rates. As per the reports, housing starts and building permits spiked to a more than 12-year high in August which took the home resales to the highest level over the last 17 months. The US-based home sales company Home Depot also carried out a survey (homedepot.com/survey) which predicted a surge in US new home sales.
The Commerce Department highlighted that new home sales rose 7.1% to a seasonally adjusted annual rate of 713,000 units the previous month. And this boost was seen due to a surge in activity in the South and West. In comparison to the previous reports of 635,000 units, the sales in July were revised up to 666,000 units. The determination of new home sales is drawn from permits and it surged 18% from a year ago. The price of the median new house increased by 2.2% to $328,400 in August from a year ago.
Mortgage finance agency Freddie Mac has highlighted that the 30-year fixed mortgage rate has dropped about 120 basis points from last year’s highs to an average of 3.73%. The surge in the sales of new homes has hinted that the housing market is expected to regain its footing after reaching a low point last year. Since the 2007-2009 recession, residential investment has decreased for six straight quarters.
Recently, the decision to cut interest rates for the second time was taken by the Federal Reserve in order to offset the impact on the economy due to the trade war between the US and China, and decreasing global growth. New home sales in the South rose 6% in August and the sales in the West increased by 16.5%. However, the Northeast and the Midwest saw a decrease in sales by 5.9% and 3.0 % respectively in the month of August.
