Home Sales Up Slightly In May
New home sales rose in May, according to the St. Louis Post-Dispatch, surprising economists who were forecasting that a rise in borrowing costs would result in a decrease.
Coinciding with an increase in new construction after several months of declines, sales of new single-family houses increased by 4.6 percent to a seasonally adjusted annual rate of 1.234 million units in May, the U.S. Commerce Department said. This comes as somewhat of a surprise to analysts, as many expected the steady increase in Florida home loan rates to further quell demand for — and subsequent sales of — new homes.
The median home price declined to $235,300, a drop of 4.3 percent from the April sales price, but up 3.1 percent from May 2005. It marked the smallest year-over-year increase since December 2003. Analysts still expect that sales of new and existing houses will fall by about 10 percent this year as increased home loan costs crimp demand.
Historically low interest rates on Florida home loans helped propel the state’s five-year real estate boom, and many other areas of the country were right alongside it.
The increased in May pushed the sales rate to the highest level since last December and came after increases of 5.9 percent in April and 7.3 percent in March. The previous months’ increases had been helped by unusually mild weather. For May, sales were up in all parts of the U.S. except for the Northeast, which posted a decline of 7.9 percent. Sales were up 6 percent in the South, while they rose by 5.3 percent in the West and were up 2.7 percent in the Midwest.
In addition to the increased inventory of existing units seen in Florida and other cooling markets, the number of unsold, new houses still up for sale at the end of the month is now at 556,000 units, down slightly from the all-time high of 560,000 houses on the market at the end of May. It would take 5.5 months to exhaust the current inventory of houses at the May sales pace, economists project.
Analysts say the huge backlog of unsold houses will put further downward pressure on the housing market in coming months. Mortgage rates have been climbing steadily this year and rose last week to a nearly four-year high of 6.71 percent, according to Freddie Mac.
