Prices are weakening and are helping to give a lift to new home sales which jumped to a higher-than-expected 689,000 annualized rate vs a revised 646,000 rate in April. The median price, at $313,000, fell 1.7 percent in the month for a year-on-year decline of 3.3 percent which is a great mismatch with the 14.1 percent growth rate for sales.
Supply did move into the market, at 299,000 units for sale for a 3,000 gain in the month, but supply relative to sales fell to 5.2 months in May vs 5.5 months in April.
Sample sizes are comparatively small in the new home sales report which not only makes for big revisions and odd jumps and drops, but they also make regional breakdowns hard to read. The South, which makes up roughly 60 percent of the new home market, saw a 17.9 percent surge in month-to-month sales to a 409,000 rate and a 19.2 percent yearly gain. This yearly gain is far outmatched, however, by the 40.3 percent rate in the Midwest where month-to-month sales, however, were unchanged.
Beneath all the volatility in this report is a new home market that continues to climb at a strong and perhaps unsustainable rate, moving from the 625,000 area to 675,000 so far this year. The drop in prices is also telling, suggesting moderation for what had been one of the strongest areas in the economy. Watch tomorrow for Case-Shiller home price data that will follow last week's weakness in FHFA prices.
Beneath uneven monthly results is a solid upward trend for new home sales which are expected to accelerate very slightly in May to a 665,000 annualized rate vs 662,000 in April. Housing completions have been coming into the market which should help sales as should relative price weakness for new homes.