Author: RBC Financial Group Economics Department

• New home sales jumped by 7.6% in May 2012 to an annualized pace of 369,000, thereby beating market expectations for a modest increase to 346,000.
• The inventory of unsold homes inched up to 145,000 from 144,000 in April, which was easily outpaced by the pickup in sales and resulting in the months’ supply of unsold homes declining to 4.7 from 5.0 in previous month.
• Even with today’s better than expected report, new single-family homes sales remain near record lows and have effectively trended sideways within the 300,000 to 400,000 range since 2009. Newly built homes continue to experience steep price competition from the ample supply of distressed existing residential properties and have seen their market share of single-family home sales fall to 8% compared to the pre-recession long-term average of 18%.

 

Sales of new single-family homes in the US jumped by 7.6% in May 2012 to an annualized pace of 369,000 units from the unrevised 343,000 units seen in the previous month. The increase put new home sales at their highest level since April 2010 and was well above market expectations for a modest 0.9% rise to 346,000. New home sales rose in the Northeast (36.7%) and South (12.7%), although weakness was seen in the Midwest (-10.6%) and West (-3.5%) that provided a partial offset.

The number of new homes available for sale rose 0.9% to 145,000 from the downwardly revised 144,000 last month (initially reported as 146,000), thereby marking the first monthly increase in new home inventories since April 2007 (the previous month’s initially reported increase was revised to a flat reading). At May’s pace of sales, it would take 4.7 months to clear the entire inventory of new homes, which is down from the revised 5.0 months in April (previously reported as 5.1). This represents the lowest month’s supply of new homes since October 2005. The median sales price for new homes was $234,500, which is 5.6% above its year-ago level and marked the fourth consecutive month that this rate has remained positive.

Even with today’s better than expected report, new single-family homes sales remain near record lows and have effectively trended sideways within the 300,000 to 400,000 range since 2009. Newly built homes continue to experience steep competition from the ample supply of distressed existing residential properties and have seen their share of single-family home sales fall to 8% compared to the pre-recession long-term average of 17%. The new home sector is likely to remain under pressure for the foreseeable future due to the persistent supply overhang of existing homes.

Information contained in this report has been prepared by the Economics Department of RBC Financial Group based on information obtained from sources considered to be reliable. While every effort has been made to ensure accuracy and completeness, RBC Financial Group makes no such representation or warranty, express or implied. This report is for information purposes only and does not constitute an offer to sell or a solicitation to buy securities.

 

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