Sales of new single-family homes unexpectely rose sharply in May, after four consecutive months of declines.
According to a joint report from the U.S. Census Bureau and Department of Housing and Urban Development (HUD), the seasonally adjusted sales rate was 696,000, representing a 10.7% increase above the revised April rate of 629,000, but a 5.9% decrease below the May 2021 estimate of 740,000.
Key findings:
- 696,000 new homes sold in May
- The seasonally‐adjusted estimate of new houses for sale at the end of May was 444,000. This represents a supply of 7.7 months at the current sales rate.
- The median sales price of new houses sold in May 2022 was $449,000.
- The average sales price was $511,400.
What the experts think:
“New home sales reversed a four-month slide, even with the impact of high construction costs and surging mortgage rates which have kept many buyers away,” said George Ratiu, senior economist & manager of economic research for realtor.com®. “New homes remain attractive for would-be buyers, even as the median price of a new home is 15% higher than last year, at $449,000. A total of 696,000 new homes sold during the month, a 10.7% increase from an upwardly revised March figure, driven by strong double-digit gains in the West and South. However, sales of new homes were 5.9% lower than the same month in 2021.
“Housing markets are in search of a reset from the feverish pace of activity seen over the past two years of the pandemic. While new homes became highly attractive during earlier COVID days, due to their enhanced functionality and technology, and the significant shortage of existing inventory. While high prices have been increasingly putting the brakes on transactions, an improvement in the supply pipeline could alleviate the strain on buyers’ budgets.
“As Americans see the size of their paychecks shrink with each passing month, affordable housing choices also wither, leading to difficult choices. In this environment, a new home purchase is likely most achievable for trade-up buyers who can leverage record-high equity, or investors. Sales of entry-level homes—priced below $300,000—accounted for less than 10% of total sales, compared with 38% in 2020. On the upside, lower materials prices should give homebuilders more room to revisit pricing strategies. The price of lumber continues to retreat toward pre-pandemic levels, dropping under $600 per thousand board feet this week,” Ratiu concluded.
“Though new home sales registered a solid increase in May, we expect sales to decline in June following the Fed’s action to significantly raise interest rates in an effort to cool the economy and ease inflation,” said Jerry Konter, chairman of the National Association of Home Builders (NAHB) and a home builder and developer from Savannah, Georgia. “High construction costs and rising mortgage rates are pricing many buyers out of the market. Only 10% of new homes were priced below $300,000 in May, compared to 23% a year ago.”
“While sales were up in May, the 696,000 pace was 5.9% lower than a year ago and new home sales on a year-to-date basis are down 10.6% thus far in 2022,” said NAHB Chief Economist Robert Dietz. “Moreover, the months’ supply measure is elevated at 7.7, but existing home inventory remains very tight and this supports demand for new construction.”
