New Home Sales Stronger than Expected in May
With sales at an annual pace of 610,000 in May, new home sales were stronger than last month and exceeded economists forecasts for 593,000 sales. April's pace was also revised higher to 593,000.
The report cheered economists who had seen some weaker housing numbers lately, including last week's housing start s.
Ward McCarthy of Jefferies writes:
The May selling rate is better than expectations and reflects an encouraging recovery from April sales that are not as bad as initially thought. Concerns about the demise of the housing market are not warranted at this juncture.
The pace of new home sales now matches the average for this year, which is higher than the 561,000 pace for last year, points out Peter Boockvar of The Lindsey Group. But it's still 15% lower than the 25-year average for new home sales.
He sees the steep climb in house prices as an impediment to future growth in sales. He writes:
Bottom line, while the timing of these data points in terms of activity are not uniform, we've seen softer housing starts, a slight moderation in builder sentiment, better than expected closings of existing homes, purchase applications for a mortgage just shy of the highest level since mid 2010 and better pace of new home sales year to date. I'll repeat my belief that the robust price gains, while great for sellers, is sowing the seeds for a slowdown in transactions at some point. Yes, low mortgage rates can help the monthly payment impact but price gains running well above the rate of inflation is just not sustainable. Buyers aren't blind, especially with many younger people struggling to come up with down payments and while renting has been expensive too, it has certainly grown in popularity in this economic recovery.