Despite economic downturns, new home sales on increase

Indicating continued strength in the nation's housing market, the latest figures on sales of new single-family homes rose 4.9 percent in July. According to a National Association of Home Builders news release, the increase is reflected in a seasonally adjusted annual rate of 950,000 units.

"Low interest rates are the most important factor behind the continuing solid pace of new home sales and production," said Bruce Smith, president of the NAHB and home builder from Walnut Creek, Calif. "With rates on long-term mortgages hovering just below 7 percent, the market is very brisk right now."

Smith also noted that the strong performance of house prices is helping boost the investment potential of homeownership, amid a shaky stock market.

"A third factor supporting new home sales is the solid demographic picture, with new-household formations occurring at a faster pace than the Census Bureau previously expected," he said. "This underlying demand is providing a strong foundation for the housing sector."

The supply-demand balance in the market for new homes also remained quite good in July. The stock of new homes for sale was virtually unchanged from the month before, while the month's supply at the current sales rate actually declined 0.2 points to 3.8.

New single-family home sales rose across every region in July. The greatest gain was recorded in the Northeast, where sales rose 18 percent to completely offset slower activity in the previous two months. Sales rose 6.9 percent in the Midwest, 2.3 percent in the South and 4.6 percent in the West, respectively.

"NAHB is expecting the housing sector to continue to provide support to the overall economy over the balance of the year," Smith said. "We're currently forecasting 925,000 new-home sales for 2001, up about 5 percent from last year."