US
purchases of new homes advanced in May to a six-month high as sales in the
South increased to the fastest pace since 2007, according to government data
released on Monday.
Highlights of new-home sales (May)
• Single-family
home sales rose 6.7% m/m to 689k annualised pace (est. 667k) after 646k rate
(revised from 662k).
• Median
sales price decreased 3.3% y/y to $313 000.
• Supply
of homes at current sales rate fell to 5.2 months from 5.5 months
Key takeaways
The
stronger-than-forecast gain in US sales reflected a 17.9% surge in the South,
the nation’s largest region, to a 409 000 annualised pace. While that was the
strongest in almost 11 years, demand was mixed in other parts of the country.
The
report also showed a six-month high in the number of homes sold but not yet
started, indicating residential construction will continue to boost growth.
What’s
more inventory remains lean. The supply of home available at the current sales
pace fell to 5.2 months’ worth, the lowest since November.
The
pickup in contract signings is an indication that a build-up in home equity
tied to rising property values is benefiting trade-up buyers. Demand also
remains underpinned by steady hiring and lower taxes.
At the
same time, prospects for first-time buyers and those with modest incomes have
deteriorated. Mortgage rates near a seven- year high and home prices that are
rising much faster than wage growth remain obstacles for these Americans.
The cost
of borrowing may continue to creep higher. The Federal Reserve boosted interest
rates by a quarter point in June and increased to two the number of additional
hikes possible this year.
Data on
existing homes released last week showed that sales unexpectedly fell in May
for a second month as an inventory crunch pushed prices up and left buyers,
particularly first- timers, on the sidelines.
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