Strong May Gain For New Home Sales

Mortgage News July 5, 2023

In May, the U.S. Census Bureau and the U.S. Department of Housing and Urban Development reported that new single-family home sales reached their highest point in 15 months. This significant boost can be attributed to the persistent shortage of existing homes available for sale.

Newly constructed home sales surged by 12.2% from the previous month, reaching a seasonally adjusted annual rate of 763,000 units. This impressive figure outperformed April’s revised rate of 680,000 units. Notably, the sales pace for last month was 20% higher compared to May 2022’s new home sales rate..

The increase in sales, both monthly and annually, reflects a sustained growth in new home sales that began earlier this year. This growth can be attributed to multiple factors, including the scarcity of existing homes for sale, pent-up demand from homebuyers, and proactive builders who are enticing buyers with incentives like discounts and buydown points. While some experts question the sustainability of this trend, economists polled by Reuters initially predicted a decrease in May’s new home sales to a pace of 675,000 units. However, so far, the current formula continues to drive thriving new home sales, and the proportion of new homes in the overall inventory remains substantial..

As of May, the supply of new single-family homes in inventory amounted to 428,000 units, indicating a 2.9% decrease compared to the previous year. In terms of the current sales pace, this inventory level represents approximately 6.7 months of supply.

Despite the increase in mortgage rates, which reached 6.57% by the end of May according to Freddie Mac, new home sales continued to climb. However, there is some positive news for prospective homebuyers, as the median price of new homes in May was $416,300. Although this figure represents an increase from April, it marks a 7.6% decrease compared to the previous year. Builders are able to offer discounts, contributing to the downward movement of new home prices, while construction companies continue to face challenges related to material, land, and labor costs.

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