Despite rising mortgage rates and home prices, sales of new homes jumped nearly 11% in May from a month earlier.
In addition, April’s sales estimate was revised upward in the report released today by the Census Bureau and U.S. Department of Housing & Urban Development.
According to the report, sales of new single-family houses in May were estimated at 696,000, up 10.7% from the revised April rate of 629,000. May’s estimate, however, was still 5.9% below the May 2021 estimate of 740,000.
The increase beat economists expectations. Economists polled by the Reuters news service had predicted new home sales would fall to a rate of 588,000 units.
May’s surprise spike was the first increase in sales of new houses this year. Even though the April rate was revised upward by 38,000, that was still below the March estimate.
Odeta Kushi, deputy chief economist for First American Financial Corp., said the surprise increase should be viewed cautiously.
“New-home sales data is volatile and one month does not make a trend,” she said.
By region, sales rose in May from April in the South and West, but fell in the Northeast and Midwest.
Sales increased the most in the West, rising 39.3% to 202,000 in May from 145,000 in April. May’s estimate also was 0.5% above the estimate for May 2021. Sales in the South rose 12.8% to 413,000 in May from 366,000 in April, and was also 1.5% above estimate for a year earlier.
The Northeast saw the most dramatic decline in sales, falling 51.1% to 23,000 in May from 47,000 in April. May’s total also was down 42.5% from a year earlier. In the Midwest, sales fell 18.3% to 58,000 from 71,000 a month earlier. The total also was down 37% from the same month last year.
In addition to home sales falling, the median sales price of new houses sold in May also declined, according to the report. The median sales price in May was $449,000, down 1.3% from April’s median price of $454,700. The price was well above the $390,400 median sales price a year earlier.
The median price means half of the homes sold for more and half for less.
The seasonally adjusted estimate of new houses for sale at the end of May was 444,000, representing a supply of 7.7 months at the current sales rate. The number of houses for sale in May was up 1.6% from 437,000 in April, the fifth-consecutive month that inventory has increased.
Again, Kushi urged caution when viewing the inventory data.
“Just 37,000 of those (homes available for sale) are completed and ready to occupy,” she said. “By stage of construction, the share of completed homes/ready to occupy inventory in May was 8.3%, down from 9.7% one year ago, while the share of new-home inventory that is under construction increased from 63% to 65.8%.”
She added that the share of completed homes sold was 27.3%, up from 24.2% one year ago, “but still low compared with pre-pandemic levels. The share of homes 'not started' sold declined compared with one year ago.”
Kushi added that affordability remains a “growing challenge, as higher new-home prices and rising mortgage rates are pricing out some buyers.”
She noted that, a year ago, 23% of new-home sales were priced below $300,000.
“In May of this year, only 9% of new home sales were priced below $300,000,” she said. “While the nation continues to face a housing shortage, new-home sales may slow as worsening affordability and higher construction costs take a toll on the new-home market.”
