New-home sales in the closing week of August are at a far higher level than expected. This is largely due to really attractive mortgage rates. Riding on a very high demand in the South, new single-family homes sold 4.8% more than the last month, corresponding to an annualized pace of 1 million. This is about 12.25% higher than the expectation of economists, according to the Bloomberg survey.
The Bloomberg data is the freshest in the line of data emphasizing the current momentum in real estate. Not only are the people being attracted by low-interest rates, but they are also taking into account the fact that they might have to work from home for a relatively long time. All this housing activity may however come to a halt if the Federal Fiscal package fails to arrest layoffs and unemployment.
The rate of sales from May-August has been highest since 1980. The South and the Northeast saw a rise in demand with the South leading with a 13.4% surge; something not witnessed since 2005. Housing inventory, though, remains a cause for concern, currently being at 3.3 months; the lowest in 57 years. The backlog figures are equally dispiriting. On 342,000 already sold properties, construction work has not yet started.