Improvement for New Home Sales in May

Improvement for New Home Sales in May

by Robert Dietz — Eye on Housing

Sales of new single-family homes gained strength in May, after lackluster reports for March and April. The seasonally adjusted annual rate of new home sales increased to 369,000 according to estimates from the Census Bureau and Department of Housing and Urban Development. This represents a nearly 20% improvement for the sales rate year-over-year.

Inventories of new home have remained approximately constant throughout 2012, with the number of new homes for sale now totaling 145,000. This marks a 4.7 months-supply at the May sales rate, a cycle low and an indication that further increases in new home demand will generate additional home building.

Sales of new homes were up solidly in the Northeast and the South, but fairly unchanged in the Midwest and the West.

While the report confirms our forecast of steady improvement for the home building sector in 2012, it is important to keep in mind that the current sales rate remains low by historical levels. As housing demand grows, home building will be constrained by challenges related to credit availability for builders and faulty appraisals.

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