(Bloomberg) -- Sales of new US homes jumped in May, reflecting gains in the West and South and interrupting a months-long skid as the residential real estate market adjusts to rising borrowing costs and still-elevated prices.
Purchases of new single-family homes increased 10.7% to an annualized 696,000 pace, the first gain this year, government data showed Friday. The figure followed an upwardly revised 629,000 in April. The median forecast in a Bloomberg survey of economists called for a 590,000 rate.
While growing affordability concerns have limited demand since the start of the year, many Americans still have the desire and wherewithal to buy a home. The pickup in sales may also reflect some buyers locking in their mortgage rate in anticipation of even higher borrowing costs.
Earlier this month, the average rate for a 30-year loan posted its largest one-week increase since the 1980s. It’s risen even further since then.
The new-home sales report, produced by the Census Bureau and the Department of Housing and Urban Development, showed the median sales price of a new home rose 15% from a year earlier to a $449,000.
At the current sales pace, it would take 7.7 months to exhaust the supply of new homes. That compares with 8.3 months in the prior month and 5.4 months one year ago. Just 8% of the homes for sale in May had been completed.
A separate report out last week showed US homebuilder sentiment slid to a two-year low in June, the sixth-straight decline, as rising inflation and higher mortgage rates weighed on demand.
Earlier this week, Stuart Miller, executive chairman of the homebuilder Lennar Corp., emphasized how the housing market has cooled in response to the Fed’s actions. Even so, he said, “demand remains reasonably strong.”
“Supply remains limited across the country,” Miller said. “Clearly, production must catch up to the growing household numbers as production of dwellings over the past decade has lagged prior decades by as many as 5 million homes.”
The number of homes sold in May and awaiting the start of construction -- a measure of backlogs -- rose from a month earlier to 190,000 in May, the highest since the start of the year, Friday’s report showed.
Sales spiked more than 39% in the West and almost 13% in the South. Purchases fell in the Northeast and Midwest.
New-home purchases account for about 10% of the market and are calculated when contracts are signed. They are considered a timelier barometer than purchases of previously-owned homes, which are calculated when contracts close.
Existing home sales fell for a fourth month, receding to the lowest level in nearly two years, figures earlier this week showed.
The new-homes data are volatile; the report showed 90% confidence that the change in sales ranged from an 8.2% decrease to a 29.6% surge.
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