Housing Bounce: Prices Surge to New Record
A bounce was widely expected after last month’s 11.4% contraction.
The big surprise was a surge in median sales price.
Housing is back on track following Wednesday’s strength in existing home sales and today’s very solid gain for new home sales which rose 2.9 percent to a 610,000 annualized rate that is near Econoday’s top estimate. The report also includes a sharp 24,000 upward revision to April which now stands at 593,000.
The real surprise in the report is enormous strength in selling prices. The median surged 11.5 percent in the month to $345,800. The year-on-year increase is 16.8 percent which, however, is nearly double the 8.9 percent gain in actual sales.
This price traction is related not only to demand but also to supply of new homes which is very tight. New homes did move into the market during the month, up 1.5 percent to 268,000 units, but sales relative to supply are unchanged at only 5.3 months.
The two focused regions for home builders, the West and South, are the strengths in May. Sales in the West jumped 13 percent to a 162,000 rate while sales in the South rose 6.2 percent to 360,000.
But sales in the Midwest and Northeast, which are small regions for home builders, fell sharply with double-digit declines, down a monthly 11 percent for the Northeast to 33,000 and down 26 percent for the Midwest to 55,000.
And this report does come with a warning — sample sizes are limited and wild revisions are routine. Housing data have been up and down this year but this report, backed by May’s gain in existing home sales, points to a mid-quarter sales bounce for the sector, one that underscores high levels of employment and stimulus from low mortgage rates.
New home sales are perhaps the most volatile of any economic report, swinging from a 621,000 annualized rate in March down to a 569,000 rate in April. Econoday’s consensus for May is right in the middle at 590,000 in a result that, when compared with the 3-month average of 606,000, would be healthy though still slightly below the recent trend.
Prices Crush Previous Record
Mortgage News Daily reports New Home Sales Rebound; Prices Crush Previous Record.
The median sales price in May was $345,800 and the average was $406,400. A year earlier the respective prices were $296,000 and $350,000. This crushes the previous record of $332,700 and also represents a record increase in the year-over-year change (+16.8% vs May 2016’s median price of $296,000).
New home sales in the Northeast were down 10.8 percent from April and unchanged from the previous May. The Midwest also had substantial declines, 25.7 percent month-over-month and 23.6 percent on an annual basis.
The other two regions offset those losses, with sales up 6.2 percent from the previous month in the South which also posted a year-over-year gain of 15.0 percent. The West had 13.3 percent more activity than in April, 14.1 percent more year-over-year.
At the end of May there were an estimated 265,000 new homes available for sale (unadjusted), 60,000 of which are ready for occupancy. The total is an increase of 6,000 from the previous month. This is estimated to be a 5.3-month supply at the current sales pace, unchanged from April. The median time that homes have been on the market is 3.1 months, down from 3.7 months in April.
New Home Sales
To put the bounce in sales into perspective, new home sales in April of 1963 were 605,000. In July of 1963, they were 665,000.
New Home Sales vs Price
The slope of prices vs sales tells it all. Most potential buyers cannot afford houses.
Mike “Mish” Shedlock