Contracts for new, single-family home sales declined to a 626,000 seasonally adjusted annual rate in May according to estimates from the joint release of HUD and the Census Bureau. This was a surprising drop due to recent softening of mortgage interest rates and continued low unemployment. Recent months’ data have been relatively positive, with the revised March pace of 705,000 being the second highest since the Great Recession. We expect a gain in June on lower interest rates, with possible upward revisions for the May estimates.
The decline in May is off recent trends. However, for the first five months of the year, new home sales are 4% ahead of the sales pace of the initial five months of 2018. These gains have distinct regional clustering. Year-to-date sales are up 7.5% in the South and 3.4% in the West (concentrated in the Mountain states), while showing a 3.2% decline in the weather-affected Midwest and a 13.3% decline in the Northeast.
Inventory was relatively stable in May, standing at 333,000 homes for sale after peaking at 347,000 in January. A year prior, new single-family home inventory registered at 302,000. The months’ supply measure was somewhat elevated at 6.4 in May. The count of completed, ready-to-occupy new single-family homes in inventory (seasonally adjusted) increased from 60,000 in May 2018 to 79,000 in May 2019. While this count has stabilized in the early months of 2019, inventory of homes under construction has decreased. Such homes have fallen from 211,000 in January to 192,000 in May.
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