NAFCU Press Release:
New-home sales surge, but overall trend modest
June 26, 2012 – New-home sales took a remarkable step forward in May, but NAFCU’s outlook remains unchanged as the overall market trend continues to be modest.
The U.S. Census Bureau reported Monday that new-home sales increased by 7.6 percent to 369,000 units in May on an annualized basis. NAFCU Chief Economist David Carrier noted that the gain surpassed expectations, but not enough to alter NAFCU’s forecast.
“Sales bottomed out in February 2011, and since then the trend has been one of steady growth,” he said. “However, we still have a ways to go before new-home sales return to pre-recession levels.”
The bureau’s report underscores the uneven nature of the new-home market recovery. While sales in two of the four housing regions increased dramatically – sales were up 36.7 percent in the Northeast and 12.7 percent in the South – data for the Midwest and the West were less impressive, with declines of 10.6 percent and 3.5 percent, respectively.
On a year-over-year basis, new-home sales were up 19.8 percent, with all four housing regions reporting increases from May 2011.
The months of available inventory fell from April’s level of 5 months of supply to 4.7 months in May. At the same time, the number of unsold homes left on the market increased slightly from 144,000 in April to 145,000 in May. On a year-over-year basis, the number of unsold homes was down 14.2 percent.
The median new-home price, non-seasonally adjusted, fell by 0.6 percent from $236,000 in April to $234,500 in May. On a year-over-year basis, the median new-home price was up 5.6 percent.
While the new-home sales market continues to see modest improvements, it continues to be constrained by tight credit, a sluggish labor market and an overhang of distressed homes. “When those things are no longer weighing on demand, we should see a much more robust housing recovery take place.”
Until then, NAFCU remains cautiously optimistic. “The homebuilder confidence index ticked up again in May to its highest level since the housing crisis began in 2007 and the housing sector appears to be making a positive contribution to economic growth just as other economic indicators have begun to falter.”