New Home Sales Stagnate. April Revisions Mitigate May Decline
News was mixed for the real estate market this morning. Sales of new single-family homes fell 0.6% in May, in contrast to expectations of a 2.3% increase. By itself, that would be awful news, but revisions to April told the opposite story: the original 0.3% advance was revised way up to a 2.7% gain.
The annual pace of new home sales is now 342,000, a whopping 32.8% below the rate in May 2008. Despite the revisions for April, that figure is quite a bit below forecasts for an annual rate of of 365,000.
At the current sales pace, there are 10.2 months’ worth of overhang sitting on the market, dragging down prices and encouraging potential buyers to wait it out as prices deflate. However, in this survey the median prices increased $9,000 in the month to $221,600, which may have contributed to the drop in sales.
Regionally, the results were all over the map, with only the South actually posting a decline (-8.5%). Sales in the Northeast surged 28.6%, while the Midwest saw an 18.6% gain, and the West saw a minor 1.3% gain.
Markets appeared to put more weight on the upward revisions than on the fresh data, as all three indexes continued climbing after the 10 am release. As of 10:30, the Nasdaq was leading the way with a 2.09% advance.
TD strategist Ian Pollick called the report “disappointing,” though he noted the two-month reduction in overhang and the upward revisions temper the pessimism.
He added: “Going forward, with mortgage rates edging higher and increased competition coming from the foreclosed housing sector, new home sales will continue to be hard pressed to eke out gains of any significance.”
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