U.S. New Home Sales Unexpectedly Spike To 15-Month High In May

(RTTNews) - The Commerce Department released a report on Tuesday unexpectedly showing a sharp increase in new home sales in the U.S. in the month of May.

The report said new home sales soared 12.2 percent to an annual rate of 763,000 in May after surging 3.5 percent to a revised rate of 680,000 in April.

Economists had expected new home sales to slump 1.2 percent to an annual rate of 675,000 from the 683,000 originally reported for the previous month.

With the unexpected spike, new home sales reached their highest level since hitting a rate of 773,000 in February 2022.

"A tight supply of existing homes, builder incentives, and resilient demand have been supporting new home sales, despite relatively high mortgage rates," said Nancy Vanden Houten, US Economist at Oxford Economics.

She added, "We don't think the pace of sales can be sustained, however, and we expect new home sales to lose some momentum as the economy enters a recession and the labor market softens."

New home sales in the Northeast and West helped lead the unexpected surge, skyrocketing by 17.6 percent and 17.4 percent, respectively.

The report said new home sales in the South also shot up by 11.3 percent, while new home sales in the Midwest jumped by 4.1 percent.

The Commerce Department also said the median sales price of new houses sold in May was $416,300, up 3.5 percent from $402,400 in April but down 7.6 percent from $450,700 a year ago.

The estimate of new houses for sale at the end of May was 428,000, which represents 6.7 months of supply at the current sales rate. The months of supply are down from 7.6 in April and 8.3 in May 2022.

A separate report released by the National Association of Realtors last Thursday unexpectedly showed a modest increase in U.S. existing home sales in the month of May.

NAR said existing home sales crept up by 0.2 percent to an annual rate of 4.30 million in May after tumbling by 3.2 percent to a revised rate of 4.29 million in April.

The uptick surprised economist, who had expected existing home sales to decrease by 0.6 percent compared to the 3.4 percent plunge originally reported for the previous month.