A report released by the Commerce Department on Wednesday unexpectedly showed another steep drop in new home sales in the U.S. in the month of May.
The Commerce Department said new home sales tumbled by 5.9 percent to an annual rate of 769,000 in May after plunging by 7.8 percent to a downwardly revised rate of 817,000 in April.
The continued decrease surprised economists, who had expected new home sales to climb 0.8 percent to a rate of 870,000 from the 863,000 originally reported for the previous month.
With the continued nosedive, new home sales fell to their lowest annual rate since hitting 704,000 in May of last year.
Meanwhile, the report showed the median sales price of new houses sold in May was a record high $374,400, up 2.5 percent from $365,300 in April and up 18.1 percent from $317,100 a year ago.
The estimate of new houses for sale at the end of May was 330,000, which represents 5.1 months of supply at the current sales rate. The months of supply are up from 4.6 in April but down from 5.3 last May.
“More than a third of for-sale inventory is of homes where construction hasn’t yet started, and an above-average share of homes sold await the start of construction,” said Mahir Rasheed, U.S. Economist at Oxford Economics.
“Both should keep a floor under new home construction over the long-term even if the pace of sales eases,” he added. “We look for new home sales to be flat to lower over the balance of 2021.”
On Tuesday, the National Association of Realtors released a separate report showing existing home sales continued to decrease in May but by less than economists had expected.
NAR said existing home sales slid by 0.9 percent to an annual rate of 5.80 million in May after tumbling by 2.7 percent to a rate of 5.85 million in April. Economists had expected existing home sales to slump by 2.2 percent to a rate of 5.72 million.
Existing home sales have plummeted by 12.9 percent since January but are still up by 44.6 percent compared to May of 2020.
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