As the spring turned to summer, the pace of home sales increased nationwide.
The rate of new single-family home sales, as estimated by the Census Bureau, improved to a seasonally adjusted annual rate of 546,000 in May, the fastest pace in seven years and a 2.2% increase over April.
New home inventory remained steady at 206,000 units nationwide (completed and under/not started construction). The months’ supply measure (the number of months required to exhaust existing inventory at the current sales pace) fell to 4.5, the lowest since June 2013. Low inventory and growing demand will support increases for single-family construction in the months ahead.
Sales growth is occurring on the re-sale side of the market as well. The National Association of Realtors (NAR) Pending Home Sales Index increased for the fifth straight month in June, rising to the highest level in nine years. This follows the NAR May existing home sales report, which increased to the highest pace in six years to a 5.35 million seasonally adjusted annual rate. The June sales rate was 5.1% higher than April and a 9.2% gain over May of last year.
Gains for existing home sales are good news for new construction, given most new home buyers must sell their existing home prior to purchasing a new residence. Furthermore, the May data from NAR indicated that the first-time buyer share, a notably weaker element of the housing market, increased to 32% in May, up from 30% in April.
These housing market improvements occurred after a weak quarter of economic growth. The Bureau of Economic Analysis estimates that first quarter GDP growth declined by 0.2%. The second quarter is expected to be better, likely at a 2.5% growth rate. For the first quarter, housing’s share of GDP grew to 15.45% of the economy, with home building and remodeling yielding 3.14 percentage points of that total.
Labor market issues remain important for the future growth for housing. Bureau of Labor Statistics data indicated that payroll employment expanded by 223,000 in June, although job gains for April and May were revised down by 60,000. The unemployment rate fell to 5.3% in June due a decline in the labor force.
Rising job openings are holding back employment gains in the construction sector and the overall economy. BLS data reveal that construction sector job openings rose to 149,000 in May, continuing the rising trend in place since 2012. Indeed, according to a new NAHB survey, the challenge of obtaining workers has grown in 2015, for builders and subcontractors.