Sales of new homes in July soared to a record 1.02 million units on a seasonally adjusted annual basis, the Commerce Department reported last month. That is a 6.7 percent increase over the June rate, which was revised downward from just over 1 million to 953,000.
“Low mortgage rates have been a key driving force in the market,” said Northeast Florida Builders Association President Denise Wallace. “In July, the rate for a 30-year, fixed-rate mortgage averaged around 6.5 percent. In recent weeks, rates have dropped into the 6.25 percent range, and adjustable rate mortgages are available at just over 4.0 percent.
“Moreover, given the generally sluggish pace of the recovery and a very low inflation environment, the Fed is unlikely to raise short-term interest rates in the foreseeable future, and long-term rates are likely to be stable as well.”
Not only is the strength of the market due to the lowest mortgage interest rates since the early 1960s, it is a reflection of the widely-held view that housing is a very good investment, Wallace added.
“People are skittish about stocks due to the massive stock market losses in recent years,” he said, “and yields on fixed-income investments are quite low.”