FILE PHOTO: A real estate sign advertising a new home for sale is pictured in Vienna, Virginia, U.S. October 20, 2014. REUTERS/Larry Downing/File Photo
WASHINGTON, (Reuters) – Sales of new U.S. single-family homes increased more than expected in May as sales in the South surged to their highest level in nearly 11 years.
The Commerce Department said on Monday new home sales jumped 6.7 percent to a seasonally adjusted annual rate of 689,000 units last month, the highest level since November 2017. April’s sales pace was revised down to 646,000 units from the previously reported 662,000 units.
Last month’s surge in new home sales unwound April’s drop. Economists polled by Reuters had forecast new home sales, which account for about 11 percent of housing market sales, rising only 0.7 percent to a pace of 667,000 units in May.
New home sales are drawn from permits and tend to be volatile on a month-to-month basis. They increased 14.1 percent from a year ago. New home sales are getting a boost from an inventory crunch in the market for previously owned houses.
A report last week showed existing home sales falling for a second straight month in May.
New home sales in the South, which accounts for the bulk of transactions, rebounded 17.9 percent to a rate of 409,000 units in May, the highest level since July 2007. Sales tumbled 10.0 percent in the Northeast and dropped 8.7 percent in the West. They were unchanged in the Midwest.
The median new house price fell 3.3 percent to $313,000 in May from a year ago. There were 299,000 new homes on the market in May, up 1.0 percent from April. Supply is just over half of what it was at the peak of the housing market boom in 2006.
Builders are struggling with higher lumber prices as well as labor and land shortages. A survey last week showed confidence among single-family homebuilders dipped in June, with builders “increasingly concerned that tariffs placed on Canadian lumber and other imported products are hurting housing affordability.”
The Trump administration in April 2017 imposed anti-subsidy duties on imports of Canadian softwood lumber.
At May’s sales pace it would take 5.2 months to clear the supply of houses on the market, down from 5.5 months in April. Nearly two-thirds of the houses sold last month were either under construction or yet to be built.