May New Home Sales: On the Rebound

• New home sales rebounded from a weak April, rising 2.9 percent in May to 610,000 units (SAAR), according to the Census Bureau. Sales for the previous three months also were revised upward.
• The median seasonally adjusted price of new homes sold in May touched new highs, rising 13.7 percent from April to $349,400, besting the previous record of $328,900 reported in December 2016.
• The number of new homes on the market in May edged 4,000 units higher, about 1.5 percent, to 268,000 units (SAAR), but similar to April, the increase was driven entirely by downward revisions to the prior month’s inventory.

New home sales rebounded from a weak April, rising 2.9 percent in May to 610,000 units at a seasonally adjusted annual rate (SAAR), according to the U.S. Census Bureau. The gain was in line with forecasts which had predicted anywhere from 600,000 to 607,000 new home sales in May.

April new home sales were revised upward from 569,000 units to 593,000 units (both SAAR), mitigating the initially-reported 11.4 percent drop in new home sales in April – which would have been the largest month-over-month dip in more than two years – to a 7.6 percent decline, more in line with historical norms. In addition, new home sales for February and March were revised upward by a combined 10,000 units. Compared to May 2016, new home sales are now up 8.9 percent.

The number of new homes for sale increased by 4,000 units (1.5 percent) from April to 268,000 units (SAAR), its highest level since July 2009, but still low by historic standards. However, in what is perhaps emerging as a worrysome trend, all of the increase was driven by downward revisions to the prior month’s estimate of the number of new homes for sale. April estimates of the number of new homes on the market, initially reported as 268,000 units (SAAR), were revised downward to 264,000 units (SAAR). The same happened last month with respect to estimates of the number of new homes for sale in March. Absent the downward revisions to March and April data, the number of new homes on the market would have been flat for the past two months.

In another signal of the strength of housing demand, 67 percent of new homes sold in May were sold while under construction or before construction even began. Among all sales, 34.5 percent were sold before construction began – the highest share of pre-construciton sales in 27 months.

The median seasonally adjusted price of new homes sold in May jumped 13.7 percent from April to $349,400, the highest median sales price on record, besting the previous record of $328,900 reported in December 2016 by 6.2 percent ($20,500). The data must be interpreted with caution since the Census data contain substantial statistical volatility, but certainly point to the extraordinary upward price pressures in the housing market due to a combination of strong demand and weak supply in both the existing and new home markets.

Related:

• May 2017 Market Report: Inventory Falls at Fastest Pace in Years
• Why Is the Market So Hot? Not Enough Homes for Sale
• May Existing Home Sales: A Surprise on the Upside