Denton County new homes experienced a dramatic Covid-19 sales recovery last month. While closings of new construction were down 7 percent during the month, pending sales of new construction in Denton County skyrocketed 42 percent. This should translate to higher sales figures in the coming months.
Sales of new homes in the Dallas-Fort Worth area were down 10 percent last month following the lockdowns and economic fallout surrounding the coronavirus, but pending sales spiked 43 percent in North Texas as buyers took advantage of record low interest rates and a rebound in many parts of the economy.
It is worth noting that median and average prices of new North Texas homes are still in an overall downtrend. Updated figures show the median price of a new DFW home fell 2.4% with the average price falling a much larger 6.5% compared to the same time a year ago. Affordability remains key to sustained sales levels for both new and existing homes. For the time being builders have been up to the task. With inventory shrinking, however, it remains to be seen how sustainable the latest bounce will be. Continued unemployment claims in the U.S. are still above 20 million, and recent data indicate that more mortgage borrowers were missing their payments this month. Mortgage delinquencies recently hit their highest levels in the U.S. since 2011.
Earlier today the Census Bureau reported new home sales for May at a seasonally adjusted annual rate of 676,000 units. This was above expectations, but previous months sales were revised lower. According to Census figures the median price of a new U.S. home contracted in May rose $5200 to $317,900. The unadjusted supply of homes in the U.S. shrank to 4.8 months. That’s still more inventory than the 3.3 months of supply we saw in North Texas last month. The supply of new homes in Denton County plummeted to only 3.1 months in May with that impressive spike in contract activity.
A little context is helpful when gauging the nature of the recovery in new home sales.
Recent news on new home sales is certainly positive, but that doesn’t mean the momentum will continue. Much of the rebound in the housing market has been driven by increased speculation and the massive injection of Federal Reserve liquidity. To maintain any sales rebound, we will need to see a real recovery in employment and an increase in affordable inventory. The National Association of Realtors reminded us what happens to sales without those supports in place. Existing home sales for May were down 9.7% for the month and down 26.6% compared to May of 2019.