New Home Sales Keep Climbing As Mortgage Rates Dip Below 4%

Current Mortgage Rates Make Homes “Cheap”

Newly-built homes continue to sell quickly.

According to the Census Bureau, July’s New Home Sales increased 5% from the month prior, crossing one-half million in annualized sales for the fifth time this year.

And, in part because today’s mortgage rates remain below 4 percent, demand for new homes is high. In many U.S. markets, renters are choosing to buy.

It helps that lenders are making it easier to get mortgage-qualified, too. Guidelines have softened at many major banks; and low- and no-downpayment loans are readily available.

According to mortgage-software provider Ellie Mae, mortgage lenders now approve more than two-thirds of all purchase mortgage applications.

It’s an excellent time to be shopping for a home. The best deals you find in housing may be the deals you find today.

New Home Sales: 507,000 Sales With Low Inventory

Each month, in conjunction with the U.S. Census Bureau, the U.S. Department of Housing & Urban Development (HUD) releases its New Home Sales report.

A “new home” is a home which has not been previously occupied; one which can be considered new construction.

For July 2015, HUD reports 507,000 new homes sold on a seasonally-adjusted, annualized basis. The tally marks the fifth 500,000+ tally since early-2008 — each of which have occurred in 2015.

As compared to last year, New Home Sales are up 26%. It’s no wonder homebuilder confidence is so strong.

Earlier this month, the National Association of Homebuilders (NAHB) released its Housing Market Index (HMI), a monthly homebuilder confidence survey.

The most recent Housing Market Index shows homebuilder confidence at its highest point in nearly 10 years with forecasted new home sales at multi-year bests and with buyer foot traffic remaining elevated.

There were two-hundred-eighteen thousand new homes for sale at the end of May, or 4,275 per state.

Home Supply Goes Deep Into Bull Market

The number of new homes sold on a seasonally-adjusted, annualized basis posted near a 7-year best last month. Buyers snapped up available new homes at all price points, and demand has remained strong.

Even as builders build more homes, the pace at which homes sell is hastening.

At the end of July, HUD reports 218,000 homes for sale nationwide. This is a 15 percent decrease from last year, and demand for new homes is holding supply down.

At the current pace of sales, the national stock of newly-built homes would be sold out in just 5.2 months.

Home supply of less than six months typically favors sellers over buyers in home negotiations; and is considered a “bull market” trait.

Today’s new home buyers have little leverage over builders and may be unlikely to receive purchase incentives including free upgrades and/or price breaks.

New Home Supply has been below six months in 44 of the last 53 months. New home prices have moved higher during that time, measurably.

New Homes On The Cheap: Mortgage Rates In 3s

The good for today’s home buyers is that mortgage rates are cheap.

According to Freddie Mac’s weekly Primary Mortgage Market Survey, the average conventional 30-year mortgage rate sits at 3.84% for prime borrowers — the 5th straight week during which mortgage rates have averaged less than 4 percent.

Conventional mortgage rates are down approximately 70 basis points (0.70%) from January of last year; and mortgage rates for VA loans, FHA loans and USDA loans are even lower.

Low mortgage rates have helped to keep homes affordable for today’s active buyers. An abundance of low- and no-downpayment mortgages have helped as well.

FHA mortgages, for example, allow downpayments of 3.5 percent on a home in all 50 states and require a FICO score of 580 or better.

FHA loans accounted for nearly one-in-four loans closed in July.

There is also the Conventional 97, which is a 3-percent downpayment program available via Fannie Mae and Freddie Mac. The program is valid for loan sizes up to $417,000 and FICO scores of 620 or higher.

For buyers with military experience, the VA home loan can be an attractive option.

VA loans allow for 100% financing and never require mortgage insurance. VA mortgage rates are also the lowest of all commonly-available mortgage programs, based on Ellie Mae data.

The USDA Section 502 loan is another no-downpayment mortgage option.

Commonly called the “Rural Housing Loan”, USDA loans provide 100% financing to qualified borrowers in low-density neighborhoods. This can include rural and suburban neighborhoods.


Realtor with Greg Garrett Realty, actively licensed in the state of Virginia

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