New Home Sales
New home sales ran at a seasonally adjusted annual rate of 689,000 in May. This level beat economists predictions of a 668,000 selling pace, although revisions to prior months were mostly negative. Sales of newly constructed homes were 6.7% higher than the downwardly revised April pace and 14.1% higher than they were a year ago. The median sales price in May was $313,000, which is 3.3% lower than a year ago. With a faster selling pace it would take less time to exhaust available inventory, 5.2 months at the current pace, compared to 5.4 months in April. New home sales have been slowly growing higher, but the month to month report, based only on small samples of data, are always choppy. In May year to date sales were 8.8% higher than the same period in 2017, a tick up from 8.4% in April. May’s pace was the second strongest of the current cycle. The biggest challenge for the housing market is still the lack of supply to feed years of pent up demand. Previously owned homes spent an average of only 26 days on the market in May, yet May sales were still lower than in April due to their lean volumes. To put the data into perspective the 2017 average was 613,000. The fourth quarter average was considerably higher at 655,000 but that period likely included significant rebuilding activity after the past season’s hurricanes. The first quarter of 2018 average held essentially steady at 656,000 and the April-May average of 667,000. It appears that a gentle uptrend in new home sales remains in place.
Pending Home Sales
US pending home sales declined 0.5% to a reading of 105.9 in May. The index tracks real estate transactions in which a contract has been signed but the transaction has yet to close, this measure dropped to a four month low in May and missed economists forecasts of a 0.6% increase. The index was 2.2% lower than a year ago. That’s the fifth straight month of negative annual readings. The story in the housing market remains centered around supply not demand. Realtors in most of the country continue to describe their markets as highly competitive and fast moving but without enough new and existing inventory for sale, essentially stalling activity. Contract signings precede sales by approximately 45 to 60 days, so this report signals the next batch of existing home sales data could be yet another disappointment.