New-home sales rebound in May on hearty demand
The numbers: New-home sales ran at a seasonally adjusted annual 689,000 rate in May.
That beat the MarketWatch consensus of a 668,000 selling pace, although revisions to prior months were mostly negative.
What happened: Sales of newly-constructed homes were 6.7% higher than a downwardly-revised April pace, and 14.1% higher than a year ago, the Commerce Department said Monday.
The median sales price in May was $313,000, 3.3% lower than a year ago. With a faster selling pace, it would take less time to exhaust available inventory: 5.2 months at the current pace, compared to 5.4 months in April.
The big picture: New-home sales have been grinding slowly higher, but month-by-month reports from the government, which are based on small samples of data, are always choppy. In May, year-to-date sales were 8.8% higher than the same period in 2017, a tick up from 8.4% in April. May’s pace was the second-strongest of the current cycle.
The biggest challenge for the housing market now is still the lack of supply to feed years of pent-up demand. Previously-owned homes spent an average of only 26 days on the market in May, the National Association of Realtors said earlier in June - yet May sales were still lower than in April, thanks to lean volumes.
What they’re saying: “To put the latest data into perspective, the 2017 average was 613,000,” said Stephen Stanley, chief economist for Amherst Pierpont Securities. “The fourth quarter average was considerably higher at 655,000, but that period likely included significant rebuilding activity after Hurricanes Harvey and Irma. The first quarter 2018 average held essentially steady at 656,000, and the April-May average is 667,000. Thus, it appears that a gentle uptrend remains in place.”
Market reaction: Stocks DJIA, -0.18% were little changed after the Commerce Department report, but builder stocks have struggled in 2018 as investors weigh the impact higher mortgage rates, leaner supply, and the fading boost from tax cuts to the companies’ bottom lines. The SPDR S&P Homebuilders ETFXHB, -0.58% has lost nearly 10% in the year to date, while the iShares U.S. Home Construction ETF ITB, -0.81% is down more than 12%.