Sales of new single-family houses in May 2011 came in at a seasonally adjusted pace of 319,000, beating Wall Street estimates of a rate of 310,000 but 2.1% behind the revised April pace of 326,000, the Census Bureau and Department of Housing and Urban Development reported Thursday. Sales, however, were up 13.5% from the annual pace of 281,000 recorded in May of last year.
Builder stocks were mixed as the overall market tumbled after a disappointing report on initial jobless claims.
Prices increased, with the median for a new single-family home rising to $222,600 from $217,000 in April and the average inching up to $266,400 from $265,000. Both were down year-over-year, however, from a median of $230,500 and an average of $281,100 last May.
Inventory fell to an all-time low of 166,000 units, a 6.2-month supply at the current sales rate, down from a 6.3-month supply in April and down 32.6% from 9.2 months in May, 2010. Median months on the market ticked up to 9.2 from 8.9 in April, down from 14 in May, 2010.
The usually volatile Northeast, for which data is often unreliable due to a small sample size, led the decline with a precipitous drop of 26.7% to an annual pace of 22,000 homes, 18.5% below the pace at the same time last year.
The Midwest was flat with April at an annual pace of 42,000 homes, 5% ahead of last May. Sales in the South were up 2.4% to a pace of 172,000, 13.9% ahead of May 2010. The West was down 3.5% from April to a pace of 83,000, 31.7% above May of last year.
Not seasonally adjusted, 30,000 homes were sold nationally in May, 2,000 in the Northeast, 4,000 in the Midwest, 16,000 in the South and 8,000 in the West. New home sales, year to date, unadjusted, were down 13.6% from the same period last year nationally, with the Northeast down 21.2%, the Midwest down 22.3%, the South down 10.4% and the West down 12.7%.
Despite the better-than-expected data, Adam Rudiger at Wells Fargo remained cautious on the builder group. "We remain somewhat skeptical of the notion that easier comps will allow for significant yr/yr [year-over-year] growth in each of the remaining months of 201," he wrote in an research note. "Over the last ten years, actual new home sales in January through May have represented an average of 45% of the year's total new home sales. Based on year-to-date results, this would imply 293,000 new home sales in 2011, down 14.5% yr/yr, but better than the 16% decline implied using the same analysis as of April. As such, we believe most builders will struggle to cover fixed costs and reach sustainable profitability in 2011."
Rudiger noted that both Hovnanian and Lennar reported big year-over-year sales gains in May, which he attributed to "public builders adding communities at a rate above the national average."
Buck Horne at Raymond James was more pessimistic. In his research note, he wrote, "New home sales going nowhere fast. May new home sales (representing contract signings) slid 2.1% (margin of error ±11%) to an annualized pace of 319,000 units, relative to the upwardly revised April run rate of 326,000 units. Importantly, the 30,000 estimated sales recorded last month (unadjusted) represent the second lowest monthly tally of new home contracts recorded during any May dating back to 1963." He continued, "In our view, the evidence is now sufficient to suggest that 2011 will not mark the beginning of the long-awaited housing recovery. The balance of recent data points, anecdotal reports, and our own field checks all seem to indicate that the pace of home sales remains stagnant. Looking ahead, we remain concerned that there are major structural headwinds working against the homebuilders, including a bloated foreclosure pipeline, tightening underwriting standards, pervasive negative home equity, and aging baby boomer demographics, to name a few. We also note that the spread between the median price on new homes versus existing homes is now at the widest level on record (32% compared to a historical average of 18%), which to us suggests that builders will likely need to consider additional price reductions in many markets."