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New Home Sales Retreat as Supply Holds Steady

Home Building Blocks BHSales of new single-family houses in May came in at a seasonally adjusted annual rate of 551,000, according to estimates released today by the U.S. Department of Housing and Urban Development [1] (HUD) and the U.S. Census Bureau [2].

This is 6 percent below the revised April rate of 586,000, but 8.7 percent above sales figures from last May. The seasonally adjusted estimate of new houses for sale at the end of May was 244,000, a supply of 5.3 months at the current sales rate, which has been the norm for several months.

The median price of new houses sold in May 2016 was $290,400, with the average coming in at $358,900.

Ralph McLaughlin, chief economist at Trulia [3], acknowledged May’s falloff, but said that the drop was to be expected, given April’s large jump in sales. “To put it into perspective,” McLaughlin said, “May’s figure of 551,000 is the second largest annual rate over the past year, eclipsed only by last month’s revised figure of 586,000.”

6-23 Trulia graphAlso, he said, the share of all home sales composed of new homes ticked downward to 10 percent in May, but new residential construction “continues to slowly ease the crunch of low existing inventory.”

“Homebuyers, constrained by persistent low inventory of existing homes, are increasingly turning to builders to satisfy their demand,” McLaughlin said.

The National Association of Homebuilders [4] (NAHB) noted that the May HUD/Census Bureau numbers are up from the average pace of 524, 000 in the first quarter.

“The monthly numbers can be volatile and subject to revision,” said Robert Denk, assistant vice president for forecasting and analysis at NAHB. “April’s initial 691,000 pace was revised down to 586,000 in May, but the upward trajectory beginning in 2012 is clear and continuing. New home sales, as well as single family housing starts, are still well below pre-housing boom norms but up from the depths of the 2011 trough.”