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First Cut: Sales of new single-family homes decline in May as earlier months borrowed some activity

Sales of new single-family homes fell 7.8% in May to 626,000, down from 679,000 in April. The decline was likely a result of some sales activity shifting forward into February, March, and April. There may have been some pent-up demand to work off after the increases in mortgage rates stifled sales in the second half of 2018. With a return of fixed mortgage rates to stimulative pre-2018 levels, consumers were ready to buy again. Sales were off 3.7% from the strong 650,000 a year-ago, but present levels are still better than those seen in the second half of 2018 when housing cooled in response to higher mortgage.

Sales across regions were uneven. The gains in the Midwest (up 6.3%) and South (up 4.9%) probably represented good weather and available units after spring construction. Declines in the Northeast (down 17.6%) and West (down 35.9%) lack of units and exhausted demand after a surge in the past few months.

 

The median price of a single-family home fell 8.1% to $308,000 in May from April and was down 2.7% compared to May 2018. However, it is notable that unit sales were stronger in lower price ranges where entry-level purchases were more likely to occur. Sales were up 15.8% in the $200,000-$299,000 price range, and down 22.2% for the $300,000-399,000 range, down 27.3% for units in the $400,000-$499,000 range, and finally down 33.3% for units priced between $500,000-$749,000. The average home price was down 2.4% to $377,200 in May from the prior month, and was up 1.2% compared to May 2018.

Builders are constructing and selling residences that are smaller to meet the demand for first-time home buyers due to lack of the existing units that traditionally are the more usual buy-in to the housing market.

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