May New Home Sales Jump 11%
In a month of generally negative housing data, May’s new home sales stood out as the only bright spot. New home sales jumped by over 11% from April, according to HUD and the Census Bureau report. In May, new single-family home sales increased to a seasonally adjusted annual rate of 696,000, up 10.7 percent from the revised April pace of 629,000 but down 5.9 percent from a year earlier.
The sales vary by region: the largest area, the South, increased by 1.5 percent from a year earlier to 413,000 units after being adjusted from 366,000 units in April. Sales in the West increased by 0.5 percent from a year earlier and increased by 39.3 percent to 202,000 units up from 145,000. Meanwhile, the Northeast declined 42.5 percent from a year earlier. Sales in the Midwest fell by 37 percent from last year and 18.3 percent in May to 58,000 units from 71,000 units in April.
“There was a surge in completions of single-family homes in May reported in the housing starts data earlier this month, which we believe was driven by buyers racing in to lock in mortgage rates before rates rose even higher,” said Mark Vitner, Senior Economist with Wells Fargo Economics, Charlotte, N.C. “Sales of new homes under construction accounted for the largest share of May’s increase, although sales of homes where construction has not yet started and sales of completed homes also rose last month.”
June Sees Big Home-Price Deceleration Coupled With Record Inventory Jump
Recent homebuyers have experienced a severe double blow of rising interest rates and sky-high home prices, but Black Knight‘s most recent Mortgage Monitor report might provide some hope for purchasers.
Annual home price growth fell sharply from 19.3% in May to 17.3% in June. According to Black Knight Data & Analytics President Ben Graboske, the reduction in the price growth rate of over two percentage points was the most significant deceleration observed by the company since at least the early 1970s. The real estate analytics firm found that although prices are rising, they are doing so at a noticeably slower rate. This deceleration is likely to continue in the near future.
A further indication that high prices and rising rates are eventually slowing the previously overheated housing market is that the price growth rate slowed down for the third month in a row in June. Another promising development for prospective buyers was that the decline in rate hike in June was accompanied by the biggest month-to-month gain in inventory in the previous 12 years. According to Black Knight’s research, on a seasonally adjusted basis, the number of homes offered for sale increased by 22 percent for the last two months, or nearly 114,000 new listings.
Pending Home Sales Post Surprise Increase In May, Likely Due To Brief Pullback In Mortgage Rates
According to the National Association of Realtors, pending home sales—a gauge of contracts to buy existing homes—rose modestly in May, up 0.7 percent from April. That ended a six-month trend of dropping demand. Sales were still 13.6% below May 2021 levels.
Mortgage rates have been on the rise for buyers since the beginning of the year, but in May, they started to decline slightly, which may be the cause of the increase in sales. The overall active inventory climbed as more supply entered the market, and some homes remained on the market for longer.
As per Realtor.com, the number of homes for sale has finally started to increase, up 21 percent from a year ago. However, it is still only approximately 50% of pre-Covid levels. Additionally, the median listing price increased by around 17% last week, remaining stable for the third week in a row.
Next week’s potential market-moving reports are:
- Monday, August 8th – Construction Spending
- Tuesday, August 9th – Job Openings, Quits
- Wednesday, August 10th – Rental Vacancy Rate, Homeowner Vacancy Rate
- Thursday, August 11th – Initial Jobless Claims, Continuing Jobless Claims, Trade Deficit
- Friday, August 12th – Unemployment Rate, Average Hourly Earnings
As your mortgage and real estate professional, I am happy to assist you with any information you may need regarding mortgage or real estate trends. I welcome the opportunity to serve you in any way I possibly can. Please feel free to reach me at (800) 216-1047.