New-home sales reach pre-COVID levels while supply declines: Redfin

The housing market continues to be the bright spot in an otherwise tumultuous time for the economy.

New-home sales grew 10.1% year-over-year in July, back to a level in line with the pre-pandemic rates, according to Redfin. It also nearly doubled the pace of existing-home sales, which increased 5.3% from the year before.

However, the other side of spiking sales and demand means plunging supply. New-home inventory fell 28.4% annually — the largest dive since Redfin started recording this data in 2013. Existing for-sale housing dropped 37%, also a record annual decrease. This discrepancy led to annual median sales price jumps of 2.3% for new homes and 9.3% for existing homes.

"The shortage of both new and existing homes is intensifying across America right now as record-low mortgage rates drive more demand, but the shortage of new homes is less severe due to a surge in construction right before the pandemic," Sheharyar Bokhari, Redfin senior economist, said in the report. "As a result, sales of new homes are growing faster than sales of existing homes. Sales of new homes are also on the rise because the coronavirus pandemic is fueling interest in the suburbs — where there tends to be more space to build new homes."

New homes coming on market in July increased 1.8% annually while existing-home listings rose 2.9%. As the dearth in inventory caused an increase in bidding wars and potential buyers waiving contingencies to strengthen their offers.

"It's startling to see new-home sales zooming at this pace — the fastest since the housing boom that preceded the crash," Holden Lewis, home and mortgage specialist at NerdWallet, said in a statement. "Nationwide, there's a small inventory of new homes to choose from, which gives buyers less negotiating leverage on price. Buyers aren't getting a price break on used homes, either, because there's a shortage of those, too."

Although options remain limited for home shoppers, some relief could be on the way. Residential construction jumped 23.4% and building permits increased 9.4% in July from the year prior, both above their respective pre-coronavirus rates.