New home sales jump to their highest level in nearly 13 years
Given the latest reports on existing and new home sales and mortgage applications, "housing is the strongest major sector of the economy," says Ian Shepherdson, chief economist at Pantheon Macroeconomics.
The state of play: Friday's report showed new home sales jumped to the highest level in nearly 13 years.
Why you'll hear about this again: The impact of falling mortgage rates, which have fallen 80 basis points this year, "is more than offsetting the wave of Covid-induced job losses, which seem to be hitting younger renters rather than would-be homebuyers," Shepherdson writes in a note to clients.
- He notes that sales rose across the country in June, despite the resurgence of COVID-19 infections.
By the numbers: Applications for mortgages to purchase a house dropped sharply after the pandemic outbreak, "but all the lost ground has been recovered and the trend is now running some 17% higher than a year ago," Shepherdson says.
- "That points to a modest further [increase] in sales, and with inventory very low — just 4.7 months in June, compared to 5.5 months in June last year — prices are likely to rise at a solid rate."
- "The median price data are wildly erratic in the short term but it’s pretty clear that developers cut prices at the height of the Covid crisis and are now pushing them back up."