WASHINGTON – Americans pulled back from buying new homes in May, reversing strong gains made in April as sales fell sharply in the Northeast and West.
New-home sales declined 6 per cent last month to a seasonally adjusted rate of 551,000 from a downwardly revised 586,000 in April, the Commerce Department said Thursday. Still, sales are 6.4 per cent higher year-to-date. Job growth and ultra-low mortgage rates have helped drive the increase, though the data can be volatile from month to month and across regions.
New-home sales have rebounded from the depths of the housing bust, though builders have focused on the upper echelon of buyers. The shift to the luxury market means that fewer new homes are being built, but the new homes are typically selling for higher prices.
May’s median sales price was up 1 per cent from a year ago to $290,400. That figure would likely have been higher if not for the steep monthly declines in the pricier Northeast and Western regions.
Northeast sales slumped 33 per cent from April to May while the West suffered a 15.6 per cent decline. Sales barely slipped in the South but improved 12.9 per cent in the traditionally affordable Midwest.
Higher price points generally help boost builders’ profit margins. But they also mean marketing to a smaller pool of potential buyers and constructing fewer homes. Despite recent gains in new-home sales, the current rate lags behind the historical average of roughly 650,000 a year.
Nor has construction necessarily relieved supply pressures. Fewer existing homes have come onto the market.
Sales of existing homes reached a seasonally adjusted annual rate of 5.53 million, the best since early 2007. Yet the number of listings has sunk 5.7 per cent from a year ago, meaning that prices are rising as homebuyers face fewer options.
Some buyers have been able to handle those price gains thanks to low mortgage rates. Mortgage buyer Freddie Mac said the average 30-year fixed-rate mortgage fell to 3.54 per cent last week from 4 per cent a year ago.