Tight supply of homes on the market, buyer demand remains strong


U.S. new-home sales increased in June, depicting the gradual recovery in a segment of the market that has been seriously impacted by supply constraints. Purchases of newly built single family homes rose 0.8% to a seasonally adjusted annual rate of 610,000 in June, the Commerce Department said. The average total of new home sales was up 14.1% year to date and represented the largest increase since June 2008.

Combined with a 1.8% slide in existing home sales reported by the National Association of Realtors, the latest data suggests the lack of supply kept a lid on activity in the crucial spring selling season despite steady housing demand. Longer-term trends indicate the market is continuing to recover, however in a slower manner than what was predicated. This is in part due to a shortage of new homes.

Keith Knutsson of Integrale Advisors exclaimed “one of the reasons for why new home sales aren’t recovering as fast is that builders are focusing on higher-end, more luxurious construction.”

New construction continues to lag behind the broader recovery, resulting from a lack of desirable building space and labor shortages. The size of the construction workforce in the U.S. decreased to 10.4 million in 2015 from 10.6 million in 2010, according to U.S. consensus data.

In addition, a boom in home renovation development also hit a record level of $316 billion this year, but may be hindering demand for new homes as buyers choose to stay where they are rather than pay a large premium for a brand new home.

At the current pace of sales, there was a five-month supply of new homes on the market at the end of June. There were 272,000 new homes available for sale, the highest level in eight years. The median sale price for a new home sold in June was $310,800.


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