In April, home prices dropped, followed by an increase in home prices in May, according to a joint release from the U.S. Census Bureau and the U.S. Department of Housing and Urban Development. One expert explained the volatility in certain areas of the U.S. are to blame for the shifting home sales market.
“Much of the movement in new home sales the past two months can be traced to volatility in reported sales in the Midwest and West,” Nationwide senior economist Ben Ayers said. “Whereas sales in the West rebounded sharply in May, Midwest new home sales slipped again to a multi-year low.”
He explained the jump in home sales is led by other areas of strength in the economy.
“When combined with the reported jump in existing home sales on Wednesday, total home sales continue to trend higher this year,” Ayers said. “Sales activity is being led by strong homebuyer demand for single-family homes in response to job market gains, low mortgage rates, and faster household formation.”
But, as another expert pointed out, the market is far from reaching its historic norms.
“Despite May's good news, new home sales still have a long way to go to reach historic norms,” Trulia Chief Economist Ralph McLaughlin said. “When taking into account the U.S. population, new home sales are still about 69% of the long-run average.”
“However, we think this reflects fundamental supply, rather than demand, problems in the housing market, as buyers look for any inventory relief they can get,” McLaughlin said.
And the report has its share of disappointing news, despite the increase posted in new home sales.
“Ultimately this report is a disappointment for those looking to builders to meaningfully help solve the pressing supply issues in the market overall, especially for entry-level buyers,” Zillow Chief Economist Svenja Gudell said. “The median price of a new home sold in May was close to $350,000, by far the highest it’s ever been and likely well beyond the budget of younger, first-time buyers that make up a sizable portion of the market right now.”
But one expert pointed out that the new home sales report continues to show positive results, hitting post-recession highs and increasing significantly from last year.
“May new home sales reflect an ongoing, positive trend for 2017, in line with NAHB’s forecast,” said Robert Dietz, National Association of Home Builders senior vice president and chief economist. “The April sales rate was revised up, and on year-to-date basis sales of new, single-family homes are running 12% higher than this time in 2016. The three-month moving average of new home sales is near the post-recession high mark.”