Sales of new homes slow in May
Sluggishness worse in Northeast, West where prices higher
WASHINGTON — Sales of new U.S. homes slumped 7.8% in May, as sales plunged in the pricier Northeastern and Western markets.
The Commerce Department said Tuesday that new homes sold at a seasonally adjusted annual rate of 626,000 in May, down from 679,000 in April. During the first five months of the year, purchases of new homes have fallen 3.7% compared with the same period in 2018.
Lower mortgage rates and a healthy job market have yet to unleash more homebuying. Sales of new homes plummeted 35.9% in the West and 17.6% in the Northeast. New-home sales rose 4.9% in the South and 6.3% in the Midwest, which are generally more affordable markets.
The median sales price of a new home fell 2.7% from a year ago to $308,000.
The data add to housing indicators showing a mixed outlook in recent months.
Sales of existing homes — which are the bulk of the market — rebounded in May. They increased 2.5% to a seasonally adjusted annual rate of 5.34 million, evidence that lower mortgage rates might ultimately improve buying.
Sales of existing homes fell last year as mortgage rates climbed to 5%, but sales appear to have leveled off this spring. Borrowing costs have fallen back below 4%, which has enabled more would-be buyers to afford homes. Prices are now increasing more slowly than wages, which also helps affordability.
Still, sales of existing homes remained 1.1% lower than a year earlier.
The number of properties sold for which construction hadn’t yet started eased slightly to 195,000, indicating potential buyers still have ample supply in the pipeline. The number of new homes for sale at the end of the month was little changed at 333,000.
The supply of homes at
the current sales rate increased to 6.4 months from 5.9 months in April.
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.
U.S. home price gains slowed for the 13th straight month in April, evidence that weaker demand is keeping prices in check even as mortgage rates fall.
The S&P CoreLogic Case-Shiller 20-city home price index rose 2.5% in April from a year earlier, down slightly from an annual gain of 2.6% in March, data showed Tuesday. That’s the smallest increase in nearly seven years.
Price increases have also cooled in several formerly hot markets, including Seattle, where prices were unchanged from a year ago. Home prices rose just 1.8% in San Francisco and 0.8% in San Diego.
The largest gains were in Las Vegas, with a 7.1% increase, followed by Phoenix with 6%, and Tampa, Fla., with 5.6%.
“Home price gains continued in a trend of broad-based moderation,” Philip Murphy, global head of index governance at S&P Dow Jones Indices, said in a statement. “Year-over-year price gains remain positive in most cities, though at diminishing rates of change.”
An index by the Federal Housing Finance Agency showed that prices rose 5.2% in April from a year earlier, according to a separate report Tuesday, a slight pickup from the previous month. The gain from March was 0.4%, higher than the median estimate of 0.2%.
Most economists see the current pace of price increases as more consistent with longer-run trends. Historically, home values have risen about 1% a year, after inflation.
Many homebuyers are still struggling with higher housing costs, which increased more quickly than wages for seven years and jumped by double digits in 2013.
Meanwhile, U.S. consumer confidence fell in June to the lowest level since September 2017 as Americans became less upbeat about the economy and labor market amid trade tensions with China and Mexico.
The Conference Board’s index declined to 121.5, lower than all forecasts in a Bloomberg survey, data from the New York-based group showed Tuesday. A gauge of the present situation decreased to a one-year low of 162.6, while the measure of expectations fell to 94.1.
The decrease in sentiment adds to a mix of conflicting indicators of the U.S. economy. The Federal Reserve decided to hold interest rates steady last week while signaling the possibility of a rate cut in July, indicating growing uncertainty about the outlook. Risks related to trade are a continuing theme.
The report follows an upbeat consumer comfort index last week, which reflected that Americans have a strong personal financial outlook.
The share of respondents who said jobs were currently plentiful eased to 44% in June, a three-month low.
The share of those who said jobs were hard to get climbed to 16.4%, the highest since November 2017.