New home sales jumped in May, as housing demand was supported by low interest rates, a renewed household focus on housing, and rising demand in lower-density markets. Census and HUD estimated new home sales in May at a 676,000 seasonally adjusted annual pace, a 17% gain over April.
However, as we noted last month, the April data was downwardly revised to a 580,000 pace, likely marking the low point of sales for the current recession. The April pace was 25% lower than the peak, pre-recession rate set in January.
The gains for new home sales are consistent with the NAHB forecast that housing will be a leading sector in an emerging economic recovery. Consider that despite double-digit unemployment, new home sales are estimated to be 1.9% higher through May than the first five months of 2019. Sales were likely supported by price incentive use in April, with NAHB data indicating that two out of ten builders used such business strategies. However, such use eased in May, as median new home pricing increased to $317,900, an almost 2% gain year-over-year.
Lower months’ supply in May, at 5.6, points to additional construction gains ahead. The count of completed, ready-to-occupy new homes is just 76,000 homes nationwide. The May data indicate an increase in homes sold that had not begun construction, rising 15% to 71,000. May also experienced a 7% year-over-year decline in homes available for sale that were currently under construction, as noted on the graph below.
The May data, although reporting gains off a relatively weak April pace, add an additional data point of a housing rebound and marking housing as a leading sector in the developing economic rebound.