New home sales surged in May to a seasonally adjusted annual rate of 763,000, an increase of 12.2% compared with April and up 20.0% compared with May 2022, according to estimates from the U.S. Census Bureau and the U.S. Department of Housing and Urban Development.
The median sales price of a new home sold in May was $416,300. The average sales price was $487,300.
As of the end of the month, there were about 428,000 new homes available for sale in the U.S. – about a 6.7-month supply at the current sales pace.
New home sales continue to make up a larger percentage of overall home sales, as existing-home sales continue to stagnate on higher mortgage rates.
However, Ksenia Potapov, economist for First American, points out that higher labor and materials costs remain a barrier for homebuilders.
“Higher builder costs remain a headwind to building more entry-level homes,” Potapov says in a statement. “In May, only 17 percent of new-home sales were priced below $300,000, which is up from 9 percent one year ago, but remains well below the pre-pandemic level of 37 percent in February 2020.
“New-home sales, along with new-home construction, have accelerated in recent months despite high mortgage rates,” Potapov says. “While existing-home inventory, which has historically made up approximately 90 percent of total home inventory, is severely restricted, new homes offer an attractive alternative.
“There is still reason to temper optimism with caution, especially with the Federal Reserve suggesting that it may raise interest rates further later this year, but the housing market is starved for supply and new homes are crucial for meeting home buyer demand,” Potapov adds.
Last week, the Mortgage Bankers Association (MBA) reported that applications for mortgages for new home sales increased 8% in May compared with April and were up 16.6% compared with May 2022.
“Purchase activity for newly built homes was strong in May, with builders continuing to bring homes to the market and buyers keen to act on available units,” says Joel Kan, vice president and deputy chief economist for the MBA. “Applications for purchase loans were up on a monthly basis and increased annually for the fourth consecutive month. Our estimate of new home sales also jumped in May, up 16 percent to the fastest pace of new home sales in 15 months.”
Photo: Todd Kent