New home sales tick higher as prices hit record highs

New home sales ticked higher in July while prices climbed to another record high, according to data released Tuesday by the Census Bureau.

Sales of new single-family homes rose 1 percent in July to a seasonally adjusted annualized rate of 708,000, rising from 701,000 in June. The median sale price for a single-family home rose to $390,500, and the average price reached $446,000 — each a new record.

“Despite a surge in home prices to record levels, new home sales eked out a small gain in July,” wrote Nancy Vanden Houten of Oxford Economics in a Tuesday analysis.

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“While demand for new homes remains strong, high prices and backlogs in construction will temper sales in the months ahead,” she added.

A surge of demand for new homes unleashed by the coronavirus pandemic drove both sales and prices to staggering levels in 2020. Sales cooled off slightly this spring as prices continued to surge, but a severe lack of inventory and building supply backlogs have kept costs for new homes high.

The inventory of new homes for sale rose 5.5 percent to 367,000 in the fastest one-month increase since November 2008, Vanden Houten wrote, but construction has not yet started on a record 29 percent of those homes.

“The need to work down these backlogs should support new home construction in the months ahead even if the pace of sales remains muted,” she wrote.

Housing inventory was already depleted before the coronavirus pandemic froze construction and deepened the backlog. While rising home prices have been a boon for homeowners, they have also left millions of potential buyers out of the market and unable to afford newly expensive homes.