Sales of newly built homes bounced back last month following an underwhelming April, according to a new report published Friday by the Census Bureau.
A total of 610,000 new homes were sold at a seasonally adjusted annual rate last month, up 2.9 percent from April’s total and 8.9 percent year over year. That’s a marked improvement from April’s 7.9 percent drop and represents the third-highest sale total seen so far this year.
Considerable gains were made in the geographic South and on the West Coast, where transactions rebounded 6.2 percent and 13.3 percent, respectively. That success offset overall weakness in the Northeast and Midwest, where sales fell 10.8 percent and 25.7 percent, respectively.
Over the course of the past year, home sales in the West are up 14.1 percent, and are up 15 percent in the South. The Northeast has remained flat since May 2016, while sales in the Midwest have fallen a considerable 23.6 percent.
“The 12-month rolling total of new home sales compared to the 50-year average looks like there’s a lot more room to grow when taking into account the size of the U.S. population,” Ralph McLaughlin, chief economist at real estate hub Trulia, wrote in a research note Friday. “New home sales per 1,000 U.S. households was 5 [sales per household] in May, which is only 68.8 percent back to normal.”
Indeed, while home sales have been relatively strong so far in 2017 – April’s weakness aside – overall transactions are still running below pre-recessionary norms as builders remain cautious.
And even though May’s new home sales were solid, real estate activity also has been weighed down by soft showings in building permits and housing starts.
“In May, new home sales made up about 11 percent of all home sales, which is slightly more than half of the pre-recession average of 21.5 percent,” McLaughlin said. “Clearly, homebuyers are being stymied not only by a shortage of existing homes, but also new ones.”
Meanwhile, a separate existing home sales report published Wednesday and profiling a significantly larger portion of all homes sold in the U.S. showed a 1.1 percent increase in May and a 2.7 percent jump on the year.
“When combined with the reported jump in existing home sales on Wednesday, total home sales continue to trend higher this year,” Ben Ayers, a senior economist at Nationwide, said in a statement Friday. “Sales activity is being led by strong homebuyer demand for single-family homes in response to job market gains, low mortgage rates and faster household formation.”
The real estate market is also pushing ahead despite tight inventories and steadily rising home prices. Existing home sales prices hit a record high last month, according to Wednesday’s data. And Friday’s report showed a third of newly built homes sold in May were valued at $400,000 or more.
A year ago, just 25 percent of new homes sold were that expensive. And only 38 percent of transactions were for homes valued at less than $300,000. More than half of homes sold in May 2016 were for less than $300,000.
“There’s several things to feel good about in the May new home sales report … but ultimately this report is a disappointment for those looking to builders to meaningfully help solve the pressing supply issues in the market overall, especially for entry-level buyers,” Svenja Gudell, chief economist at Zillow, said in a statement Friday. “The median price of a new home sold in May was close to $350,000, by far the highest it’s ever been and likely well beyond the budget of younger, first-time buyers that make up a sizable portion of the market right now.”