Sales of new single-family homes in America jumped by 6.7 percent in May to a seasonally adjusted annual rate of 689K units, according to new data from the U.S. Census Bureau. That was the largest headline gain since November and much better than anticipated. However, essentially all of the strength last month occurred in the southern region of the country, where new home sales surged at the fastest pace since 2007. Sales elsewhere in the U.S. were either flat or negative.
The inventory of new single-family homes rose in May to the highest level since February, but months’ supply slid to 5.2 based on the current (elevated) sales pace. The median selling price fell to a 13-month low in May ($313,000). Although that is a 3.3 percent decline from this same period last year, home affordability remains a challenge for many first-time buyers and those with modest incomes. Another headwind is mortgage rates near a 7-year high, but this has been partially offset by a strong labor market and lower taxes. More importantly, new home sales can be very volatile on a month-to-month basis, meaning that longer-term trends in this data series are worth paying more attention to. Further, sales tend to head sharply lower ahead of a recession, something which fortunately has yet to occur.
Sources: Econoday, Census Bureau, Bloomberg, FRBSLPost author: Charles Couch