May New Home Sales Post Strong Growth

New home sales posted a healthy 6.7 percent increase in May, HUD and the Census Bureau reported yesterday.

The report said sales of new single-family houses in May rose to a seasonally adjusted annual rate of 689,000, 6.7 percent higher than the revised April rate of 646,000 and 14.1 percent higher than a year ago (604,000).

A strong performance in the South more than offset tepid activity in other regions. In the South, sales jumped by nearly 18 percent in May to 409,000 units, seasonally annually adjusted, from 347,000 units in April and improved by 19.2 percent from a year ago. In the West, sales fell by 8.7 percent to 157,000 units in May from 172,000 units in April but rose by 0.6 percent from a year ago.

Sales were unchanged in the Midwest at 87,000 units, seasonally adjusted, in May but jumped by more than 40 percent from a year ago. In the Northeast, sales fell by 10 percent in May to 36,000 units from 40,000 units in April and fell by 16.3 percent from a year ago.

Mark Vitner, senior economist with Wells Fargo Securities, Charlotte, N.C., noted the surge in the South marked a new cycle high. “Building activity now appears to be back on track after being disrupted following hurricanes Harvey and Irma,” he said.

The report showed the median sales price of new houses sold in May fell to $313,000, while the average sales price fell to $368,500. The seasonally adjusted estimate of new houses for sale at the end of May rose slightly to 299,000, representing a 5.2-month supply of 5.2 months at the current sales rate.

Vitner said the South had outsized influence on price and inventory factors as well. “Both the median and average price of a new home fell in May, likely signaling increased sales of entry-level homes and the surge of new home sales in the relatively more affordable South,” he said. “Persistently low inventories of existing single-family homes are likely pushing buyers to new homes. Inventories of new homes are also tight but development is picking up, particularly in the South, which has many large, unconstrained housing markets.”