U.S. new home sales jumped 7.1% in August, as low mortgage rates pull buyers into the housing market.
The Commerce Department said Wednesday that new homes sales increased to a seasonally adjusted annual rate of 713,000, up from a revised 666,000 in July. So far this year, sales have risen a healthy 6.4%.
Trade tensions and slower economic growth have pushed down interest rates, helping homebuyers for the moment. But new construction has yet to meet the demand from likely buyers, so the sales gains could translate into higher prices.
August's average sales price rose 6.1% from a year ago to $404,200, a record level not adjusted for inflation. Economists say there was a shortage of affordable homes available for purchase.
"Sales of entry-level homes, priced below $200,000 accounted for only 10.0 percent of total, as builders remained focused on the upper end of the market," said George Ratiu, senior economist at Realtor.com.
Much of last month's sales growth came from homes that have yet to be built, a sign that low mortgage rates are behind the surge in purchases. The 30-year mortgage rate averaged 3.73% last week, down from 4.65% a year ago according to mortgage buyer Freddie Mac.
Still, along with an uptick in home construction and sales of existing homes, which make up the bulk of the market, the jump in new home sales may signal a strengthening housing market.
"This makes the housing data three-for-three in August, as housing starts, existing home sales, and new home sales all increased and were noticeably stronger than expected," said Stephen Stanley, chief economist at Amherst Pierpont. "This may reflect the plunge in mortgage rates as well as the moderation in home price appreciation so far this year."
Home sales climbed in the South and the West, but slipped in the Northeast and the Midwest. The 16.5% monthly sales gain in the more expensive West was reflected by an increase in purchases of homes priced above $400,000 relative to July.