New Home Sales Surge Ahead in May at Fastest Pace in 2 Years

New Home SalesBy MARTIN CRUTSINGER

WASHINGTON -- Americans bought new homes in May at the fastest pace in more than two years. The increase suggests a modest recovery in the housing market is continuing, despite weaker job growth.

The Commerce Department said Monday that sales of new homes increased 7.6% in May from April to a seasonally adjusted annual rate of 369,000 homes. That's the best pace since April 2010, the last month that buyers could qualify for a federal home-buying tax credit.

Even with the gains, the annual sales pace is less than half the 700,000 that economists consider to be healthy.

Yet the increase follows other signs that show the housing market is improving nearly five years after the bubble burst.

Builders are slowing gaining confidence in the market and starting to build more homes. Mortgage rates have plunged to the lowest levels on record, making home-buying more affordable. Prices remain low and have started to stabilize. And sales of previously occupied homes are much higher than the same time last year.

Though new homes represent less than 20% of the housing market, they have an outsize impact on the economy. Each home built creates an average of three jobs for a year and generates about $90,000 in tax revenue, according to the National Association of Home Builders.

One reason prices could rise is the supply of new homes for sale remains extremely low.

Just 145,000 new homes were for sale in May. That's not much higher than the 144,000 available in April, which was the lowest on records dating back to 1963. At the current sales pace, it would take 4.7 months to exhaust the supply, well below the six-month supply that is generally considered healthy by economists.

"With no excess inventory of unsold new homes, any sustained rebound in new home sales should quickly translate into firmer prices," said Steven Wood, chief economist at Insight Economics.

The median price of a new home sold in May edged down 0.6% from the April to $234,500. But the price was 5.6% higher than the same month one year ago.

Builders are responding to the low supply. In May, they requested the most permits to start construction on homes and apartments in three and a half years.


The gains in new homes sold were concentrated in two regions of the country last month. Sales surged 36.7% in the Northeast and 12.7% in the South. Sales fell 10.6% in the Midwest and were down 3.5% in the West.

Sales of new homes are increasing despite a sluggish job market, which has slowed retail spending and business investment in computers and machinery. Some economists warned that the weaker job market has also started to affect some home sales.

Sales of previously occupied homes fell in May to a seasonally adjusted sales rate of 4.55 million after nearly touching a two-year high in April.

Still, re-sales have risen 9.6% from the same month last year.

Hiring slowed sharply in April and May, raising concerns about the strength of the recovery. Employers have added an average of only 73,000 jobs a month in April and May. That's much lower than the average of 226,000 added in the first three months of this year.

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ovstampco

Where I have a house the value is still going down, where I have a condo the price is still going down. The cost of living keeps increasing and my wages are stagnant. But I am better off that four years ago and now we have accelerated our National debt by five trillion dollars thanks to the racist republicans. Finally relief with gas prices, but at eighty bucks a barrel the price of gas should be two dollars and twenty five cents... What is up Republicans - you're corporate overlords are controlling gas prices just like they pay these bloggers a quarter a post here on this site ... Oops I am actually of work now, so where does it all end?

June 26 2012 at 4:04 PM Report abuse rate up rate down Reply
ovstampco

Home sale would not be so high if the truth would be told. Millions have lost there homes because the banks would not modify loans. Many people lost every thing and the nest egg was in the home. But with all the rising cost banks kept the money and built more banks and gave all the executives huge multi million dollar salary increases. So sure when a home owner needs help they were denied. so the they lost the home and all are be resold at a much lower cost to new buyers. So the entire truth is not told. Because of the Republicans America is in the worst shape that any one could have ever thought. Our American dream is not the hope and change we were promised. We do need a change and not the one we currently have. Old people choose to eat or starve, familys torn apart, soilders come home to backs turned. Is the America no not the one millions have known. The Racist Republicans must be voted out of the House , that is obvious.

June 26 2012 at 4:01 PM Report abuse -2 rate up rate down Reply
ovstampco

The only thing that is surging is all the BS in the conservative media !

June 26 2012 at 3:59 PM Report abuse -1 rate up rate down Reply
chris1011

Vulture capitalist Mitt Robme at Bain Capital when he outsourced jobs:
I will take the pension fund money that I raided from your father and run for president and you will still vote for me.Type your comment here

June 26 2012 at 2:56 PM Report abuse -3 rate up rate down Reply
craigmrfrn

YEA! GO OBAMA!!!!!

June 26 2012 at 10:45 AM Report abuse -4 rate up rate down Reply
MYLES

NOTHING BUT SMOKE AND MIRRORS.

June 26 2012 at 8:51 AM Report abuse +4 rate up rate down Reply
bdzdean

I'd sure like to know where and what states all these "NEW" construction home sales are being generated.

Seems to me last I herd we've still got several thousands of existing homes sitting vacant in the U.S. housing market. And it was actually foreclosures and short sale properties that contributed to the majority of homes sold.

But then again, much like the initial unemployment data. Once the factual numbers were calculated and announced. The initial information " job growth is looking better" V.S. final factual information. Left much to be desired.

June 26 2012 at 8:33 AM Report abuse +4 rate up rate down Reply
1 reply to bdzdean's comment
jdykbpl45

It comes from the state of no hope and no change as expoused by Obama,

June 26 2012 at 6:34 PM Report abuse +1 rate up rate down Reply
akahada

I believe that all Bank forcloser count as new home sales now...so now that the banks have learned to cross all T's and dotted all i's ....wa la....the instant rise in these numbers...thats all folks!

Bull crap!

June 26 2012 at 5:40 AM Report abuse +4 rate up rate down Reply
Rhianon

And at this rate, there will be millions of homes just sitting and no one living in them. Here comes the squatters. Renting again won't be so looked down upon. I sold my home in 94 and have been renting ever since. I am financially better off now than back then. Owning a home isn't for everyone. I hated yardwork anyway.

June 26 2012 at 2:30 AM Report abuse rate up rate down Reply
jumran

Home sale would not be so high if the truth would be told. Millions have lost there homes because the banks would not modify loans. Many people lost every thing and the nest egg was in the home. But with all the rising cost banks kept the money and built more banks and gave all the exitives huge multi million dollar salary increases. So sure when a home owner needs help they were denied. so the they lost the home and all are be resold at a much lower cost to new buyers. So the entire truth is not told. America is in the worst shape that any one could have ever thought. Our American dream is not the hope and change we were promised. We do need a change and not the one we currently have. Old people choose to eat or starve, familys torn apat, soilders come home to backs turned. Is the America no not the one millions have known. Obama must resign or voted out or impeached.

June 26 2012 at 2:07 AM Report abuse +1 rate up rate down Reply