Sales of New Homes in the U.S. Reach All-Time Highs in July

Motivated by low mortgage rates, house hunters across the nation turned into buyers, sending new-home sales in July to the highest monthly level on record and giving a solid boost to sales of previously owned homes.

Housing reports released Monday, provided good news for the economic recovery, which has been advancing in fits and starts.

Sales of new homes in July climbed to a seasonally adjusted annual rate of 1.02 million, a record sales pace and a 6.7% increase from June’s level, the Commerce Department reported Monday.

Sales of existing homes--the biggest slice of the housing market--rebounded in July, rising 4.5% from the previous month to a rate of 5.33 million units, according to the National Assn. of Realtors.

In California, sales rose 7.5% in July to 540,800 at a seasonally adjusted annualized rate, and the median price of an existing home rose 21%, to $323,700 from $267,520 a year earlier, the California Assn. of Realtors reported. It was the fifth month in the last six in which prices have risen by 20% or more in the state.

Nationally, the average price of a new home in July was $215,200, up 2.8% from the same month last year. But the median price--meaning half sold for more and half sold for less--was $170,500, a 2.6% decline from a year ago. The median price of an existing home was $162,800 in July, a 7.3% increase from the same month a year ago.

One of the bright spots of the economic recovery has been the housing market, which performed well even during last year’s recession, largely because of low mortgage rates.

In July, the average rate for a 30-year fixed-rate mortgage was 6.49%, down from 6.65% in June and well below the 7.13% rate for July a year ago, according to mortgage company Freddie Mac. Last week, rates on 30-year mortgages edged up to 6.27%, after dipping to a 32-year low the previous week.

Another factor motivating home buyers: solid appreciation in housing values. That offers people an attractive investment, especially given the volatility of the stock market, economists said.

In July, those factors offset potentially negative ones, including eroding consumer confidence and a stagnant job market.

“Things couldn’t be better on the financing side. We’re seeing strong upward movements in house values in most places, and I also think we’re still seeing a rally around hearth and home that followed the 9/11 terrorist attacks,” said David Seiders, chief economist at the National Assn. of Home Builders.

However, in June, new-home sales fell 2.6% and existing-home sales plunged 11.1% as worries about jobs, the roller-coaster stock market and the direction of the economy seemed to weigh heavily on prospective buyers. Yet, even with the declines, the level of sales remained healthy.

Economists believe new-home and existing-home sales will set records this year. Seiders predicts new-home sales will hit 936,000. David Lereah, chief economist for the National Assn. of Realtors, is projecting existing-home sales to reach 5.44 million.

Growth in new-home sales in July was not uniform across the country. In the Midwest, sales soared 16% to a rate of 203,000, the highest level since December 1993. In the South, sales jumped 10.1% to a rate of 470,000, the highest level since November. But in the Northeast, new-home sales fell by 9.1% to a rate of 60,000, and in the West, they dipped by 0.4% to a rate of 284,000.