WASHINGTON—Sales of new homes in the U.S. rose heading into the summer months, despite high selling prices and low home inventory.
Purchases of newly-built single-family homes—a relatively narrow slice of all U.S. home sales—grew 6.7% to a seasonally adjusted annual rate of 689,000 in May, the Commerce Department said Monday. Economists surveyed by The Wall Street Journal had expected a smaller 0.9% increase.
From the prior year, sales increased 14.1% in May. The pace of new-home sales still remains well below the elevated levels seen before the 2007-09 financial crisis and recession.
New-home sales data can be volatile. May’s 6.7% gain came with a margin of error of 14.1 percentage points.
Sales in the South appeared to drive last month’s growth. New-home purchases in the region rose 17.9%, the largest gain since the end of 2014. Meanwhile, sales in the Northeast and West declined and purchases were flat in the Midwest in May.
More widely, housing market inventory has been tight, driving up home prices and pricing some potential buyers out of the market. Scarce construction labor and rising material costs and mortgage rates are also headwinds for the housing market.
The average interest rate on a 30-year fixed-rate mortgage in May was 4.59%, up more than half a point from 4.03% in January, according to Freddie Mac. Record-high lumber prices have added nearly $9,000 to the price of a new single-family home since January 2017, according to the National Association of Home Builders.
The spring home selling season appears to be stuck in neutral. Sales of previously-owned homes have declined compared with a year earlier in four out of the first five months of this year. Meanwhile, home builders’ future expectations of single-family home sales fell two points in June, according to NAHB’s recently-released housing-market index, though sentiment remains solid.