New home sales significantly increased in May, revising last month's rate, according to the new report from the Census Bureau and the Department of Housing and Urban Development.
“New home starts recently touched a recovery-era high, which is great, but new highs need to be set and exceeded consistently for the next few years at least before we get to the level of building needed to support more growth in sales,” Zillow Senior Economist Aaron Terrazas said.
Sales of new single-family houses increased 6.7% to 689,000 in May, up from April’s 646,000 sales. This is 14.1% above the estimate of 604,000 sales in May 2017.
The climb in new home sales is surprising, but Terrazas attributes the increase to a resilient housing market.
“Today’s very strong May new home sales data is a welcome surprise and is a strong continuation of the kind of consistent growth the new home market has exhibited for roughly the past half decade since the housing market bottomed out,” Terrazas said. “And there’s still plenty of room to grow because as it stands, even with this progress we’re still building far fewer homes than demographic changes and existing demand from home buyers would suggest we otherwise might be.”
The median sales price of new homes sold increased to $313,00, The average sales price was $368,500.
The seasonally adjusted estimate of new homes for sale by the end of the month is 299,000 in May. This represents a supply of 5.2 months at the current sales rate.
Terrazas says that the housing markets biggest deterrence to growth will be affordability.
“Assuming home builders can continue to make progress, it will be crucial to look closely at their ability to keep adding supply at an affordable price point,” Terrazas said. “The relentlessly rising costs of land, labor and lumber seem to suggest that building affordably will become increasingly difficult without these costs getting passed on to buyers.”
Although new home sales saw an increase, existing home sales fell back for the second straight month in May, according to the latest report from the National Association of Realtors.