New Home Sales Up in May as Prices Drop Despite Increase in Material Costs

By Mark Lieberman

Managing Director and Senior Economist

Highlights:

  • Pace of contracts for new home sales ROSE 6.7 percent in May to 689,000 (Seasonally Adjusted Annual Rate);
  • Unsold inventory increased 3,000 in May to 299,000 computing to a 5.2-month supply, down from 5.5 months in April;
  • Median price of a new home DROPPED $5,500 from April to $313,000;
  • Year-year the median price of a new home was DOWN $10,600 (4.8 percent)

Trends:

  • The increase in the pace of sales was the strongest since last November when sales rose 15.2 percent month-month;
  • The median price of a new single-family home dropped for the second straight month and is at its lowest level since April 2017 ($311,100);

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

Image result for new home sales

Led by a surge of home-buying in the South, new home sales spurted in May with the strongest month-month gain since last November. The increase in sales (contracts) in the South was consistent with the increase in housing permits in that region in April.

The drop in the median price of a new single-family home did not reflect the higher cost of building materials resulting from the imposition of higher tariffs by the Trump Administration. The drop in the median price – while reflecting a change in buyer activity – cane before the impact of higher prices for lumber (affecting framing and roof shingles).

In May, 46 percent of homes sold carried a price tag of less than $300,000, the highest percentage since last June.

Still, the new home sales report confirmed the still high level of builder confidence in the Housing Market Index for June. The Index, compiled by the National Association of Home Builders was down two points from May at 68. Any reading above 50 is considered positive.

 

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