Sales of new US single-family homes unexpectedly rose in May, but the rebound is likely to be temporary as home prices continue to increase and the average contract rate on a 30-year fixed-rate mortgage approaches 6%, reducing affordability.
New home sales jumped 10.7% to a seasonally adjusted annual rate of 696,000 units last month, the Commerce Department said on Friday. April’s sales pace was revised higher to 629,000 units from the previously reported 591,000 units.
Sales surged in the West and the densely populated South, but declined in the Midwest and Northeast.
Economists polled by Reuters had forecast that new home sales, which account for 11.4% of US home sales, would fall to a rate of 588,000 units. Sales fell 5.9% on a year-on-year basis in May. They peaked at a rate of 993,000 units in January 2021, which was the highest level since the end of 2006.
The average contract rate on a 30-year fixed-rate mortgage increased this week to more than a 13-1/2-year high of 5.81%, from 5.78% last week, according to data from mortgage finance agency Freddie Mac. The rate has surged more than 250 basis points since January.
Data this week showed sales of previously owned homes fell to a two-year low in May. Housing starts and building permits also declined last month, though they remained at high levels. But cooling demand could help to bring housing supply and demand back into alignment and slow price growth.
The median new house price in May surged 15% from a year ago to $449,000. There were 444,000 new homes on the market at the end of May, up from 437,000 units in April. Houses under construction made up roughly 65.8% of the inventory, with homes yet to be built accounting for about 25.9%.
At May’s sales pace it would take 7.7 months to clear the supply of houses on the market, down from 8.3 months in April.
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