New Home Sales Hit 6-Year High in May
By Lucia Mutikani
WASHINGTON — Sales of new U.S. single-family homes jumped to a six-year high in May, the latest indication the housing market was starting to dig out of a recent soft patch.
The Commerce Department said Tuesday sales surged 18.6 percent to a seasonally adjusted annual rate of 504,000 units. That was the highest level since May 2008, while the increase was the biggest since January 1992.
“This is the strongest level since the end of the recession and is an encouraging sign that housing activity improved in the second quarter,” Cooper Howes, an economist at Barclays Research, said in an analyst note.
Home sales peaked last year at an annual rate of 459,000 in June, but then lost altitude. The decline reflected an increase in mortgage rates that occurred after the Federal Reserve began discussing pulling back on its monthly bond purchases that were keeping long-term interest rates low.
The inventory of unsold new homes was unchanged at 189,000 homes at the end of May, the same as April. That inventory level would be depleted in 4.5 months at the May sales pace, an extremely low level that underscored the fact that the supply of new homes remains well below historic averages.
Sales were up in all regions of the country in May, led by a 54.5 percent surge in sales in the Northeast. New home sales rose 34 percent in the West and 14.2 percent in the South. The Midwest had the smallest month-over-month sales gain of just 1.4 percent.
Even with the big overall gain, sales of new homes are still running at just about half the pace of a healthy real estate market.
But there have been some encouraging signs of a spring rebound in housing.
The National Association of Realtors reported Monday that sales of previously owned homes jumped 4.9 percent in May, the biggest one-month gain in nearly three years. That increase pushed the sales rate to 4.89 million homes, the strongest showing since last October.
While economists were encouraged by the second straight monthly gain in existing home sales, they noted that the sales rate is still below the recent peak of 5.38 million sales hit last July.
Higher mortgage rates and the bad weather weighed on sales of both existing and new homes in late 2013 and early 2014. But sales seem to be staging a rebound, helped by solid job growth and growing inventories of homes for sale, a development that has helped to hold down price increases.
Economists say there is significant pent-up demand for homes as many potential buyers put off purchases over the past few years because of concerns about the economy.