NAHB reports new home sales on the rise in June

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New home sales increased by 1.7 percent to a seasonally adjusted annual rate of 922,000 in June, according to the U.S. Census Bureau. |ret||ret||tab|

In a news release from the National Association of Home Builders, NAHB President Bruce Smith said, "The housing market is still showing remarkable strength in the face of a weakening economy and a weakening job market."|ret||ret||tab|

Smith, a builder from Walnut Creek, Calif., attributed the strength of the market to a number of factors. "Mortgage interest rates are low in the 7 percent range for fixed-rate financing and close to 5 percent for adjustable rate mortgages and home prices have been increasing substantially, generating equity for homeowners," he said. "The unsettled conditions in the stock market have further strengthened demand for housing," he added.|ret||ret||tab|

Another factor fueling demand for new homes is strong household growth, Smith said. "Recently released statistics from the 2000 Census indicate that household formations were about 1.35 million annually between 1990 and 2000. Originally, the Census Bureau had projected about 1.15 million household formations per year during the 1990s. In addition to the increased demand for starter homes that we have already seen, this means that future demand for both first-time and trade-up homes should be stronger than previously estimated."|ret||ret||tab|

Smith said NAHB is predicting a modest decline in housing activity in the third quarter and into the fourth quarter, before the market strengthens in 2002. He added that it appears that the Federal Reserve Board is likely to lower the federal funds rate by at least one-quarter percent at its Aug. 21 meeting, and this should help keep mortgage rates low.|ret||ret||tab|

According to the release, on a regional basis, new home sales increased 7.3 percent in the Northeast in June, rising to a seasonally adjusted annual rate of 59,000. Sales in the South increased 7.1 percent to 466,000. |ret||ret||tab|

In the West, new home sales declined by 1.6 percent to 241,000. In the Midwest, which has borne the brunt of the contraction in the U.S. manufacturing sector, sales dropped 9.3 percent to 156,000 in June.|ret||ret||tab|

The inventory situation in the market for new homes remained healthy in June, the NAHB reported. The number of new homes for sale stood at 292,000, and the month's supply of new homes for sale was unchanged.[[In-content Ad]]