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First Cut: Sales of new single-family homes rebound in June, supplies remain narrow, and prices are firm

Sales of new single-family homes rose 7.0% in June to 646,000 from 604,000 in May. Sales have rebounded close to the underlying trend and more than retraced the softer readings in the second half of 2018. Sales were up 4.5% compared to the year-ago month.

Sales have remained solid among mid-priced homes, indicating that builders are tapping into the market for first-time buyers and downsizers. Of all sales, 36% were in the $200,000-$299,000 range and 26% were in the $300,000-$399,000 range. The share of sales for higher priced units ($400,000 and up) has declined from earlier this year, while the lowest priced units ($299,999 and below) have edged up.

June was an active month for buying units not yet started (up to 205,000 from 153,000 in the prior month), while units under construction sold were down (195,000 from 214,000), possibly because developments were already largely under contract. Sales of completed homes were not materially different in June from May (246,000 from 237,000).

Sales were uneven across regions. The Northeast (-4.2%) and Midwest (-26.3%) may have seen the exhaustion of a little pent-up demand as consumers moved to buy while mortgage rates were low. Sales in the South (+0.3%) were little changed and remained solid. Sales in the West (+50.4%) had another month in which consumers were anxious to buy before prices went up further and mortgage rates helped affordability.

The months’ supply of new homes for sale fell to 6.3 in June from 6.7 in May when spring construction got started in earnest after late winter storms and exceptionally rainy months in March and April.

The median price of a new home rose 2.3% to $310,400 in June from May, but was flat compared to a year ago. The average home price was down 0.7% to $368,600 in June, and off 0.4% compared to a year ago. Some of this reflects the shift to smaller homes, but also that buyers have some power to negotiate on price in spite of narrow supply.

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