May New Home Sales: Poised for Continued Improvement

• May new home sales were up 16.6% from April and 12.7% from May 2019, to 676,000 (SAAR), according to the U.S. Census Bureau.
• The median sales price of new houses sold in May 2020 was $317,900, up 1.7% from a year ago.
• Inventory of new homes available for sale fell 2.2% from April and 5.4% year-over-year.

Even with a healthy downward restatement to April's data, recent strength in new home sales is setting the stage for a swift improvement in the housing market that so far shows few signs of slowing. New home sales data is more timely than existing sales data, and today’s report suggests would-be buyers remain eager to take advantage of favorable mortgage rates and enter the market while they can. The rapid improvement in sales of new homes may also reflect a change in consumer preferences, with buyers showing a newfound penchant for cleaner, never-lived-in homes -- although the long-term durability of that trend remains to be seen. Either way, builders are taking notice: Builder confidence shot way up June – a sign of good things to come for a housing market that continues to struggle with exceptionally low inventory. Low inventory levels and tight lending conditions will continue to drag on the housing market, as will ongoing broad-based economic and public health risks associated with the pandemic. But at least for now, home buyers are largely disregarding those headwinds and the housing market appears poised to continue its improvement into the early weeks of summer.