New single-family homes in the U.S. are selling at the fastest pace in almost 9 years, according to the Department of Commerce.
New home sales rose 12.4%, reaching a seasonally adjusted rate of 654,000 units. That beats a revised June figure of 582,000 and is 31.3% higher than the July 2015 rate of 498,000 units.
The latest homes sales total is the highest since October 2007, when it reached 727,000, according to the U.S. Commerce Department.
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Median home price drops
The median sales price of new houses sold in July 2016 was $294,600, down from June ($310,500) and from July 2015 ($296,000).
"The growing number of lower-price level sales may reflect the growing importance of new-entry millennials as well as builders recognizing the need to downsize homes to actually sell them," says Joel Naroff, president of Naroff Economic Advisors.
Supply of news homes fell during the period as well. The seasonally adjusted estimate of new houses for sale at the end of July was 233,000. This amounts to a home supply of 4.3 months at the current sales rate, the Commerce Department says. That's down from June, when the supply would last for 4.9 months, and July 2015, at 5.2 months.
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Sales in Northeast, South improve
"That is the tightest that new home supplies have been since 2013," says economist Diane Swonk. "Housing starts, in particular, will need to pick up to meet demand in the market."
Sales in the Northeast made the biggest jump – by 40% -- to 35,000 from 25,000 in the previous month, followed by the South, where they rose by 18.1% to 398,000 from 337,000 in June. Sales in the Midwest and West were roughly flat, month over month.
"The persistence of sales in the South is particularly important in assessing the outlook for the overall construction market," Swonk says. "The South accounts for more than half of all single-family housing starts and is critical for the volume of starts and construction jobs as well as the supply of first-time buyer homes."