This summer not only saw record-breaking heat across the nation, it saw new home sales reach levels not seen over the past nine years. Thanks to a surge in demand, a continuation of the low-interest rate environment, and low existing inventory the housing market climbed.
According to the Commerce Department, sales have been showing an over 30% increase each month this summer when compared to the same months last year.
At the same time, the supply of homes entering the market continues a downward trend. The average has been about 4.5 months at current sales prices. When compared to the average benchmark of 6 months in a balanced market it is evident that demand is high.
Houses priced between $200,000 to $399,999 remain the bulk of total housing sales, while transactions of homes priced below $150,000 or higher than $750,000 increased as well.
Matthew Pointon, a property economist at Capital Economics, said that it would not be surprising to see price hikes if builders do not speed up production if the high demand, low inventory and the persisting high sales of new homes continues.
Most economists agree that with new homes starts slowing the market will remain tight, and sales will naturally slow. With this combination, it will be easy to see the theory of supply and demand in full effect.