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Economy in Brief

U.S. New Home Sales Rise Unexpectedly in May
by Tom Moeller  June 24, 2022

• Gain follows four straight months of decline.

• Improvement is uneven throughout country.

• Median sales price falls modestly.

Earlier weakness in new home sales stabilized last month, as the job market remained firm. New single-family home sales during May increased 10.7% (-5.9% y/y) to 696,000 units (SAAR) following a 12.0% decline in April to 629,000, revised from 591,000. The increase occurred despite a rise in the average rate on 30-year fixed-rate mortgage loans to 5.23% from 4.98% in April. The Action Economics Forecast Survey expected 592,000 sales in May.

Sales improvement was scattered across the country. Sales in the West surged 39.3% (0.5% y/y) to 202,000 last month following a 20.8% April decline. It was the highest level since January. Sales in the South rose 12.8% (1.5% y/y) to 413,000, the highest level in three months, after falling 7.3% during April. Offsetting these increases, sales in the Northeast declined 51.1% (-42.5% y/y) to 23,000, the lowest level since April 2020. Sales in the Midwest were off 18.3% (-37.0% y/y) to 58,000, the lowest level in six months.

Lower prices helped fuel home sales last month. The median price of a new home in May weakened 1.3% (+15.0% y/y) to $449,000 following a rise to a record $454,000 in April. The average sales price of a new home declined 10.2% (+14.8% y/y) to $511,400 from April's record $569,500. These sales price data are not seasonally adjusted.

The decline in sales left the market better stocked. The number of unsold new homes increased 1.6% (35.4% y/y) to 444,000, the most since May 2008 and up by roughly one-third y/y. However, the seasonally adjusted months' supply of new homes for sale fell to 7.7 in May from 8.3 in April. It remained up from a record low of 3.3 months in August 2020. The median number of months a new home stayed on the market fell to a record of 2.4 months. These figures date back to January 1975.

New home sales activity and prices are available in Haver's USECON database. The consensus expectation figure from Action Economics is available in the AS1REPNA database.

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