May saw a substantial gain in new home sales, after four months of solid declines and increasingly difficult affordability conditions. The boost is likely attributed to buyers wanting to get in ahead of the June interest rate increases by the Federal Reserve.
The U.S. Department of Housing and Urban Development and the U.S. Census Bureau’s newly released data suggests sales of newly built, single-family homes in May increased by 10.7% to a 696,000 pace although new home sales are down by 10.6% in 2022 based on a yearly average.
"While sales were up in May, the 696,000 pace was 5.9% lower than a year ago and new home sales on a year-to-date basis are down 10.6% thus far in 2022," NAHB Chief Economist Robert Dietz said. "Moreover, the months' supply measure is elevated at 7.7, but existing home inventory remains very tight, and this supports the demand for new construction."
A new home sale ensues when a deposit is accepted, or a sales contract is signed irrelevant of the stage of construction. The 696,000 May reading apart from being adjusted for seasonal effects is the number of new homes that would be sold if the rhythm continued at the same rate for the next 12 months.
New single-family homes for sale remained high with a 42.6% increase over last year with 444,000 properties available on the market. That said, only 8.3% of these are ready to move into.
Higher construction and development costs have pushed prices up by 15% compared to a year ago however the average sales price dropped to $449,000 in May compared to $454,700 in April.
New home sales fell nationwide by 3.8% in the Northeast, 2.2% in the West, 12.3% in the South, and a significant 21.7% in the Midwest.