As expected by Christophe Barraud, US new home sales beat expectations, reaching their highest level in nearly 1-1/2 years. In May, they surged by 12.2%, reaching a seasonally adjusted annual rate of 763,000 units, the Commerce Department reported on Tuesday. All four regions of the country witnessed an increase in sales, with the South leading the way with its highest sales since the end of 2021. This balanced growth across regions underscores the widespread strength of the housing market recovery. This remarkable growth can be mainly attributed to a shortage of previously owned homes available for sale.
In the meantime, April’s home sales pace was slightly revised down to 680,000 units from the initial report of 683,000 units. However, economists polled by Reuters and Bloomberg had expected a decline to a rate of 675,000 units for new home sales. Therefore, the actual increase of 12.2% came as a positive surprise.
When compared to the previous year, new home sales rose by an impressive 20.0% in May. This surge in sales indicates that the housing market has likely found a solid foundation and may even be showing signs of improvement. In fact, recent data revealed that homebuilder confidence rose into positive territory in June, marking the first time in 11 months. Housing starts also experienced a surge in May due to limited supply, while home resales saw a slight increase.
The backlog of homes sold in May and awaiting construction has reached its highest level since January 2022, reflecting the growing demand. Despite this, the supply of homes for sale remains relatively stable, with approximately 428,000 homes available at the end of May. This represents a 6.7-month supply at the current sales rate, the lowest since February 2022.
The limited inventory in the resale market has played a significant role in bolstering the sales of new single-family homes. Owners, hesitant to list their homes in a high interest-rate environment, have shifted their focus to purchasing new homes. As a result, builders are racing to meet the pent-up demand by initiating more construction projects, leading to an increase in new-home sales that surpass pre-pandemic levels.
Separately, the latest data from the U.S. Treasury Department further supports the housing market’s upward trajectory. A new analysis revealed that real construction spending on new manufacturing facilities has doubled this year compared to the average between 2005 and 2022. Infrastructure, semiconductor, and clean energy subsidies, along with tax incentives, have been instrumental in driving this surge. Notably, spending on computer, electronics, and electrical manufacturing facilities nearly quadrupled during the same period.