Sales of new homes shot up 14.4% in July, the biggest increase in almost three years, the government reported today.
The Commerce Department said new single-family homes were sold at a seasonally adjusted annual rate of 739,000 units last month as the housing industry continued to benefit from falling mortgage rates.
Mortgage rates, which hit a peak of 11.22% in March, had dropped to 9.81% by the end of July, giving a boost to a sector of the economy that had been hard hit by rising rates earlier in the year.
The July sales increase was the biggest monthly advance since September, 1986, when sales climbed by 22.9%. The annual sales rate of 739,000 units was the highest level for sales since December, 1986, when new homes were sold at a rate of 784,000 units.
The July increase was the third in the past four months, following increases of 9.4% in April and 6.4% in May. Sales in June were revised to an annual rate of 646,000 units, the same as the May level.
The report on new home sales followed a report last Friday that sales of existing homes also improved in July, rising by 1.2% to an annual rate of 3.40 million units, the second consecutive month that existing home sales had risen.
The price of a new home posted a modest decline in July. The median new-home price fell 3.7% to $118,800. The median is the point where half the homes sold for more and half for less.
The average price of a new home dropped an even sharper 7.8% to $143,300.
The boom in sales was led by a huge 55.8% jump in activity in the Northeast, where sales climbed to an annual rate of 120,000 units. That marked the biggest monthly increase in that region since February, 1982, when housing began to rebound from the last recession.
Sales in the West were up 8.9% to an annual rate of 232,000 units.