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Sam Dunlap, CIO at Angel Oak Capital Advisors, breaks down the “historic mismatch between supply and demand” that builds up behind historical levels.
New home sales unexpectedly fell in May as prices rose to record levels.
Sales of new single-family homes fell 5.9% in May to a seasonally adjusted annual rate of 769,000, according to the Bureau of Statistics and the Department of Housing and Urban Development. Last month’s reading was revised down by 46,000 to 817,000. Analysts polled by Refinitiv had expected an increase to 870,000 in May.
New home sales represent about 10% of the housing market.
The elephant in the housing market is a gain for builders
New home construction has been slowed in recent months by supply chain challenges which have driven up costs of basic commodities, including lumber. A price hike earlier this year added $36,000 to the cost of building a new mid-size home.
Rising input costs and flight from city centers during the pandemic have exacerbated supply shortages even though the report showed stockpiles increased last month to 330,000 units, the highest since July 2019.
As supply increases, so does prices. The average selling price rose to a record high of $374,400.
A separate report released Tuesday by the National Association of Realtors showed that existing home sales also fell in May amid record price growth.
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The number of contracts closed last month decreased 0.9% from April to a seasonally adjusted annual rate of 5.8 million. The decline in decades came as the median existing home price grew at a record annual rate of 23.6% to $350,300. Prices have posted 111 consecutive months of year-over-year gains since March 2011.
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