We're going to tell a story about the history of the market for new homes in the U.S. almost entirely in pictures today. While all the charts we'll present cover the period from January 1976 through July 2020, most of the focus will be on the last several months of that timespan.
Let's start with the history of 30-year conventional mortgage rates:
The lower the interest rates, the more affordable a higher sale price for new homes can be, which can contribute to rising sale prices. Remember, home buyers aren't just buying a house - most are also buying a monthly mortgage payment they believe they can afford. With mortgage rates at all time lows, both average and median new home sale prices are rising toward all time highs.
With the Federal Reserve acting to lower interest rates to help stimulate the U.S. economy during the coronavirus recession, the number of new home sales has been rising. The following chart shows the trailing twelve month average of those sales, which smooths out seasonal volatility in the data.
The combination of higher average prices and rising number of sales means that the market capitalization of the new home market in the U.S. is rising.
The new home market in the U.S. is showing surprising strength during the Coronavirus Recession. The data presented in these four charts confirms that observation and helps explain why.
Labels: real estate
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