pent up demand lifts new home sales
Didier Malagies • June 5, 2020
Mortgage Forbearance , what is going on?
Pent-Up Demand Lifts May New Home Sales 21%, Survey Finds
Wall Street Journal
Source: Wall Street Journal
Written by: Nicole Friedman
Sales of newly built homes surged in May, a new survey shows, the latest sign that the housing market is already recovering from a sharp drop in home sales due to the pandemic.
New home sales rose 21% in May from a year earlier, and the average sales rate per community rose 24% year-over-year, according to a survey of more than 300 U.S. builders conducted by John Burns Real Estate Consulting LLC.
The survey offers an early nationwide snapshot of sales activity around the country. Official figures for May new-home sales are set to be released by the Commerce Department on June 23.
The survey suggests those numbers should reflect a significant improvement over the preceding months, when home-shopping demand plunged in March and April as potential buyers stayed indoors and unemployment rose. Demand has started rising in recent weeks, real-estate brokers say, as stay-at-home restrictions ease and mortgage rates remain near record lows.
“We have definitely seen green shoots in the last month. We’ve definitely seen growth off the bottom,” said Margaret Whelan, chief executive of Whelan Advisory, a boutique investment bank for the housing industry. “The question is whether or not that’s going to be sustainable.”
Mortgage applications for home purchases in the week ended May 29 also rose for the seventh straight week, up 5.3% from a week earlier and 17% from a year earlier, according to the Mortgage Bankers Association.
The spring is typically the most important season for home builders, as families want to buy houses and move in before the start of a new school year. Some of the recent buying represents springtime demand that was delayed by a month or two, said John Burns, CEO of John Burns Real Estate Consulting.
Other buyers who planned to buy homes in 2021 or later are moving up their timelines, Mr. Burns said. “People don’t want to be quarantined again in a place they don’t like,” he said, “so if you were thinking about buying, even next year, you’re like, ‘Let’s do it now.’”
Market watchers caution that sales could slow later in the year as pent-up demand declines, especially if there is another wave of widespread job losses or a resurgence of the coronavirus. The U.S. jobless rate fell to 13.3% in May, the Labor Department said Friday. New-home sales can also be volatile, and a large move one month might not indicate a trend.
Sales were strongest in Florida, up 59% from a year ago, and in the Midwest, up 48% in the same period, the survey showed. Sales in the Northeast, Northwest and Southern California fell from a year earlier.
Homes by WestBay LLC, a builder in Riverview, Fla., recently raised its annual sales forecast to 835 home closings, up from 775 in its earlier outlook.
“I expected April to be very slow, but it was only kind of slow,” said Homes by WestBay President Willy Nunn. The company’s cancellation rate rose to 27% in April, compared with a typical rate of 17%, he said.
“And then May rebounded and was exceptionally strong,” Mr. Nunn said.
New homes, which typically make up about 10% of the market, have benefited as homeowners have opted not to sell during the pandemic, reducing the supply of existing homes in many regions. The total inventory of homes for sale as of May 30 was about 20% lower than a year earlier, according to Realtor.com. ( News Corp, parent of The Wall Street Journal, operates Realtor.com.)
New-home sales unexpectedly rose 0.6% in April from the prior month, according to the Commerce Department. New-home sales are measured when contracts are signed.
Pending sales of existing homes, which are also measured when contracts are signed, fell 22% in April from March, according to the National Association of Realtors. NAR said it expects existing-home sales to bottom in May before ticking higher.
Tim Fritz, an accountant, and Sara Hann, a critical-care nurse, bought a newly built home in Shippensburg, Penn., last month.
“Having uncertainty with the economy right now, obviously it is scary,” said Mr. Fritz, who is 30 years old. “But knowing that we were able to get a lower mortgage rate because of everything that’s going on right now, that was a huge benefit for us.”
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