New Home Sales Fall Again in May

By Mark Lieberman

Managing Director and Senior Economist

Highlights:

  • Pace of contracts for new home sales FELL 7.8 percent in May to a seasonally adjusted annual rate (SAAR) of 626,000;
  • The April sales pace originally reported as 673,000 was revised up to 679,000
  • The unsold inventory of new homes EDGED UP 1,000 or 0.3 percent in May to 333,000;
  • With the slower sales rate, the months’ supply of new homes for sale ROSE to 6.4 in May from 5.9 in April;
  • Median price of a new home TUMBLED $27,100, or 8.1 percent, from April to $308,000.

Trends:

  • The number of contracts for the sale of new homes fell month-month for the second month in a row for the first time since last summer;
  • The month-month percentage decline in the median price of a new home in May matched the increase in the median price in April;
  • In its separate report on new home completions, the Census Bureau, said last week builders had finished 890,000 single-family homes – 264,000 more than sales.

Data Source: Census Bureau and Department of Housing and Urban Development

Image result for new home sales

Builder confidence slipped a bit in early June and the Census Bureau and Department of Housing and Urban Development offered an explanation as new home sales fell for the second straight month. Even as the median price of a new home in May gave back the 8.1 percent price increase in April, the lower prices did not draw buyers back into the market.

The median price of a new home fell month-month for the third time this year: the average price drop, $20,700, exceeding the average gain in the other two months, $20,500.

Not only did new home sales drop month-month in May, but they fell year-year for the first time since December, another sign the housing market is teetering.

The Census-HUD report tracks contracts for sale not closings. The National Association of Relators’ parallel report on pending home sales is due next week.

New home sales fell most sharply in the West dropping from an SAAR of 195,000 in April to 125,000 in May.

The Census-HUD report followed the report from the National Association of Home Builders showing builder confidence fell in early June to a still solid 62 from 64; the NAHB’s buyer traffic report, measuring potential buyers kicking tire at model homes, remains below 50 which is the tipping point between a positive and negative outlook. The buyer traffic measure has been below 50 for eight straight months.

The dour sales report comes at the beginning of a traditional home buying season when prospective homeowners try to settle in a new home between the end and the beginning of the school year.

Meanwhile, the number of residential construction jobs, according to the Bureau of Labor Statistics, rose about 5,000 from April to May to 2,901,000.

Hear Mark Lieberman on P.O.T.U.S. (Sirius-XM 124) Friday at 6:20 am Eastern Time. You can follow Mark Lieberman on Twitter at @foxeconomics.

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