The summer is here and the spring homebuying season is closing down with a monthly slowdown in new home sales.
Sales of new single-family homes in May decreased month-over-month, but were up annually, according to a report from the U.S. Census Bureau and the U.S. Department of Housing and Urban Development.
New home sales decreased by 6% monthly to a seasonally adjusted annual rate of 551,000 in May, according to the report. This is down from April’s rate of 586,000.
“New home sales decreased 6% in May, but much of the decrease was due to April’s large jump rather than a trended decrease,” Trulia Chief Economist Ralph McLaughlin said. “To put it into perspective, May’s figure of 551,000 is the second largest annual rate over the past year, eclipsed only by last month’s revised figure of 586,000.”
On the other hand, new home sales are still up from last year by 8.7%. May 2015’s seasonally adjusted annual rate sat at 507,000.
This is in contrast to the existing home sales, which jumped in May to their highest increase in almost 10 years, according to a recent report by the National Association of Realtors.
“While the headline story may be a dip in sales of newly built homes following last month’s spike, the big picture is the continued year-over-year sales growth, surging past last year’s pace," Quicken LoansVice President Bill Banfield said. "This annual increase, partnered with a meaningful rise in home resales, points to a growing economy and a strong demand for homeownership.”
In April, new home sale increased 16.6% from March, and 23.8% annually.
“After a sharp uptick in April, which has since been revised downward substantially, it's unsurprising to see this kind of monthly drop in May new home sales,” Zillow Chief Economist Svenja Gudell said. “This doesn't diminish the overall upward swing new home sales have been on, and May sales were up strongly from a year ago.”
“More encouragingly, the inventory of new homes for sale rose strongly in May, and permits and starts data points to more to come,” Gudell said. “While still not enough to make much of a dent in the overall inventory shortage the market is experiencing, this steady flow of homes coming onto the market may give some buyers a few more choices this summer.”
“But new homes also command a hefty price premium over existing homes, and that price keeps rising, likely limiting options for many first-time and entry-level buyers,” he concluded.
The median sales price of new houses sold in May was $290,400, according to the report. The seasonally adjusted estimate of new homes for sale was 244,000 at the end of May, a 5.3 months’ supply at the current sales rate.