May New Home Sales Post Healthy 16.6% Gain

Home buyer enthusiasm for new homes intensified in May, HUD and the Census Bureau reported yesterday, jumping by 16.6 percent from April and by nearly 13 percent from a year ago.

The report said sales of new single-family houses in May rose to a seasonally adjusted annual rate of 676,000, 16.6 percent higher than April’s revised rate of 580,000, and 12.7 percent higher than a year ago (600,000).

Every region saw double-digit percentage gains in sales except for Midwest, where sales fell by 6.4 percent in May to 73,000 units, seasonally annually adjusted, from 78,000 units in April. From a year ago, however, Midwest sales improved by 2.8 percent.

In the South, sales jumped by 15.2 percent in May to 402,000 units, seasonally annually adjusted, its best performance since last October. In April, sales in the South totaled ust 349,000, the lowest level in more than a year. From a year ago, sales in the South improved by 6.3 percent.

In the West, sales jumped by 29 percent to 169,000 units, seasonally annually adjusted, from 131,000 units in April, and improved by 31 percent from a year ago. In the Northeast, sales rose by 45.5 percent to 32,000 units in May from 22,000 units in April and improved by 45.5 percent from a year ago.

“New home sale have held up better than existing homes, as there are fewer restrictions on showings,” said Mark Vitner, Senior Economist with Wells Fargo Securities, Charlotte, N.C. “Buying conditions rebounded sharply over the past month, reflecting lower interest rates and improvement in the job market.”

Vitner noted housing remains a “bright spot, which seems inconsistent with high unemployment. Job losses have been centered in the hospitality and retail sectors, however, where workers tend to be younger and more likely to be renters rather than home buyers,” he said.

“Today’s new home sales report from the Census Bureau provided further evidence of the comparative resiliency of the housing sector,” said Doug Duncan, Chief Economist with Fannie Mae, Washington, D.C. “With inventories of existing homes for sale remaining tight (likely due in part to home sellers’ COVID-19 concerns), new home sales have played a more prominent role in fulfilling demand, especially as buyers take advantage of continued low mortgage rates. New sales also benefit from their geographic footprint, as they disproportionately occur in lower density suburban and exurban areas, which to date have tended to be impacted comparatively less by social distancing measures and shutdowns.”

The report said the median sales price of new houses sold in May rose to $317,900. The average sales price was $368,800. The seasonally adjusted estimate of new houses for sale at the end of May fell to 318,000, representing a supply of 5.6 months at the current sales rate.