Record prices for new homes amid a sales pickup indicate the supply of houses may be tight at the lower end of the market, pinching first-time buyers, government data showed Friday.
Single-family home sales increased 2.9% month over month to a 610,000 annualized pace (the estimate was 590,000). The median sales price surged 16.8% year over year to a record $345,800. The supply of homes unchanged at 5.3 months and 268,000 new houses were on market at end of May.
Low mortgage rates, a solid labor market and rising wages continue to drive steady demand for housing while scarce inventory sends prices to the highest ever, a trend that could squeeze first-time buyers. The industry faces headwinds including a lack of available workers and a limited number of plots to build on.
Even with the gain, the pace of sales remains at less than half the peak seen in 2005. Any supply rebound may be a ways off, as new-home construction starts are down in recent months and permits were at a one-year low in May, according to government data.
The increase in demand was led by a 6.2% jump in the South and a 13.3% rise in the West, while sales fell in the Northeast and Midwest.
The April reading was revised to a 593,000 pace from a previously reported 569,000. The figures reflect 90% confidence that the change in sales last month ranged from a 10.1% drop to a 15.9% gain, pointing to the volatility of the data.
New-home sales account for about 10% of the market and are tabulated when contracts are signed.
The data were released jointly by the Census Bureau and Department of Housing and Urban Development in Washington.