Purchases of new homes declined in May from an eight-year high as the housing market continued to display the choppy progress that's been a hallmark of the recovery.
Sales fell 6% to a 551,000 annualized pace following a 586,000 rate in April that was slower than previously estimated, Commerce Department figures showed Thursday. The median estimate in a Bloomberg survey called for a 560,000 pace in May.
While the report showed demand retrenched last month, the volatile data are showing gradual improvement on the back of steady job gains and low mortgage rates. Stronger wage growth and a greater availability of cheaper properties would help lure more first-time buyers and provide an additional push for the housing recovery.
"New-home sales are still doing relatively well, but the spring selling season is not quite as robust as what we had thought, given the downward revisions," said Omair Sharif, senior U.S. economist at Societe Generale in New York, whose May sales forecast was among the closest in the Bloomberg survey. "The level of sales is picking up, but it's still a grind."
Because the new-home sales figures for the three previous months were all revised lower, the May data should also be considered preliminary. The report said there was 90% confidence the change in sales last month ranged from an 18.8% drop to a 6.8% increase.
Economists' estimates ranged from a sales rate of 500,000 to 610,000 after a previously reported 619,000 in April. Even with the downward revision to April, the pace was the strongest since February 2008. Over the last three months, purchases have averaged a 553,000 pace, the best in eight years.
New-home purchases were 8.6% higher in May from a year earlier on an unadjusted basis, the Commerce Department’s report showed.
Some 201,000 homes sold in May weren't yet started by builders, the most since June 2007. That indicates construction starts may firm up in the months ahead, and help drive economic growth.
Purchases fell in three of four regions last month, led by a 33.3% decrease in the Northeast, the smallest market for new homes. Sales declined 15.6% in the West and 0.9% in the South. Demand climbed 12.9% in the Midwest to an annualized 70,000 homes, the most since May 2014.
The supply of homes at the current sales rate increased to 5.3 months from 4.9 months in April. There were 244,000 new houses on the market at the end of last month, up from 241,000 and the most since September 2009.
The median price of a new home increased 1% last month from a year ago to $290,400.
New-home sales, which accounted for about 10% of the residential market last year, are tabulated when contracts are signed. That makes them a timelier barometer than transactions on existing homes.
Closings on those previously owned homes — which usually take place a month or two after a contract is signed — climbed 1.8% in May to a 5.53 million annual rate, the highest level in more than nine years, the National Association of Realtors said Wednesday. Purchases advanced in all regions but the Midwest.
That report also showed there was a 4.7-month supply of existing homes available on the market, indicative of lean inventory levels, according to the Realtors group. Homes typically stayed on the market for 32 days in May, the shortest time in records going back five years.
Improving sentiment among homebuilders may lead to a construction boost in the months ahead, as companies feel more confident they can find buyers for new houses. Still, the number of viable lots and skilled workers remain limited, meaning the pace of progress in new-home building will be similarly limited.
