New Home Sales, which measure signed contracts on new homes, fell 11.3% from April to May, significantly missing forecasts that were expecting a rise. Signed contracts were also 16.5% lower than they were in May of last year.
What’s the bottom line? Despite the pullback in sales, demand for new construction remains strong due to the persistent shortage of existing homes for sale. On that note, more “available” supply is needed to meet buyer demand. While there were 481,000 new homes available for sale at the end of May, slightly higher than the 474,000 seen in the previous report, only 99,000 were completed, with the rest either under construction or not even started yet.
Also, the median home price fell only 0.1% from April but this was not due to falling home prices, which continue to rise nationwide per Case-Shiller and other appreciation indexes as noted below. The median home price represents the mid-price of sales, meaning it’s influenced by the mix of sales in any given month. Builders are constructing smaller, more affordable homes to meet buyer demand, and that pushed the median home price slightly lower comparatively.