May New Home Sales Down, As Expected

New home sales fell in May following a post-recession high in April and a more encouraging report on existing home sales, HUD and the Census Bureau reported yesterday.

The report said new single-family home sales in May fell by 6 percent to 551,000, seasonally adjusted. This compared to 586,000 in April (revised) but represented an improvement of 6.4 percent from a year ago (507,000). HUD/Census also downwardly revised the previous three months by a cumulative 55,000.

Regionally, sales fell everywhere except the Midwest. In the South, sales fell by 0.9 percent in May to 323,000 units, seasonally adjusted, from 326,000 in April but improved by 13.3 percent from a year ago. In the West, sales dropped by 15.6 percent to 124,000 units in May from 147,000 units in April and declined by 8.8 percent from a year ago.

In the Northeast, sales plummeted by 33.3 percent to 34,000 units in May from 51,000 in April but improved by nearly 31 percent from a year ago. In the Midwest, sales rose by nearly 13 percent to 70,000 units in May from 62,000 in April and improved by nearly 17 percent from a year ago.

“May’s decline is at odds with the strengthening housing data we have seen this year,” said Mark Vitner, senior economist with Wells Fargo Securities, Charlotte, N.C. “Sales had surged in the prior month, as this year’s unusually early Easter provided an extra weekend of home buying in April. Some pullback in May was expected.”

HUD/Census reported the median sales price of new houses sold in May fell to $290,400; the average sales price was $358,900. The seasonally adjusted estimate of new houses for sale at the end of May rose slightly to 244,000, representing a 5.3-months’ supply at the current sales rate.

“With seasonal quirks pulling new home sales down in May, sales should bounce back in June,” Vitner said. “Home builder sentiment rose 2 points in June, with strong gains in prospective buyer traffic. Rising builder confidence has led to more construction, which has been needed because inventories have been exceptionally lean. Now with more homes to choose from and mortgage rates retreating, the housing market should heat up this summer.”

Earlier this week, the National Association of Realtors reported existing home sales rose by 1.8 percent in May to a nine-year high.