So far the US real estate market has had a good year. New and existing home sales have surged since December.
According to the Census Bureau, new home sales—sold in January—are up 3.7 percent over the month with a steady 5.5 percent growth over the year. As such, online real estate hub Trulia chief economist Ralph McLaughlin comments, “New homes are helping satisfy homebuyers constrained by low resale inventory, and the slow and steady uptick in sales reflects this. That said, new sales have much room to grow. In January, new home sales represented about 11.6 percent of all sales, which is less than half of the pre-recession average of 23.6 percent.”
This is the highest level since February of last year.
With that, National Association of Realtors chief economist Lawrence Yun adds, “Much of the country saw robust sales activity last month, as strong hiring and improved consumer confidence at the end of last year appear to have sparked considerable interest in buying a home.”
Now, this is not such a surprise; after all, home-sale growth has been slowing for some time. This is mostly due to strong demand outpacing the limited number of homes currently on the market, today. Since home construction readings remain mixed—a struggle during this tough economic time—there simply just is not enough homes to satisfy the demand.
McLaughlin continues, “How many new home sales do we need for the market to look normal? If we compare the share of new home sales to total sales, that share needs to more than double. While it’s been tough for homebuyers to buoy existing home sales because of low inventory, it looks like there is much potential for new homes sales to run higher.”
In addition, Zillow chief economist Svenja Gudell acknowledged the sentiments, equally indicating that these numbers could have actually been much worse. Gudell notes that the market needs “a big infusion of new construction and new home sales activity, and there are signs this could come as the busy spring shopping season gets underway.”
Gudell also adds, “Lately, builders have been focused largely on serving a higher-end clientele, and the extent to which they can build a product affordable to the lower and middle segments of the market will go a long way in determining how the upcoming spring season shakes out.”