New Home Sales Fall In May, Annualized Rate Strong

Data on new home sales, due to small samples, are always volatile, but underlying the monthly swings is a trend of strength. New home sales fell a severe looking 6.0 percent in May but the annualized sales rate, at 551,000, is second best of the cycle, next only to April's 586,000 (revised downward from an initial 619,000).

Home builders were offering concessions in the month based on the price data where the median fell 9.3 percent to $290,400. Year-on-year, the median price is up only 1.0 percent. A positive in the report is supply as 3,000 more new homes entered the market bringing the total to 244,000. Relative to sales, supply improved to 5.3 months vs 4.9 months in April.

The South is the driving force in the data, dipping 0.9 percent to a 323,000 rate but still up 13.3 percent year-on-year. In contrast, sales in the West, which is also an important region for new homes, fell 15.6 percent in the month to a 124,000 rate which is down 8.8 percent on the year.

Trends right now in the housing market do not appear to be red hot but only moderate, which perhaps is a positive for an often boom-and-bust sector.

Recent History Of This Indicator:
New home sales are forecast to fall back 9.6 percent in May from April's giant 16.6 percent surge, to an annualized rate of 565,000. Despite the decline, the consensus rate for May would still be the second best of the recovery and next only to April. Lack of supply has been limiting sales of new homes, permits for which are rising at only a 5 percent pace.