With the housing tax credit effectively gone on April 30, analysts and industry watchers had expected fewer new-home sales in May. But they didn’t expect a record-breaking low seasonally adjusted pace of 300,000 units, which represents a 32.7% drop from April’s home-buying bustle. Research firm IHS Global Insight, for example, had projected a level of 375,000 units, which was positively bearish compared to a consensus prediction among selected economists of 430,000 units.
Reality, though, proved much harsher, with the lowest seasonally adjusted level of new-home sales since such data began being collected in 1963. Sales are even down on an annual basis, with May’s number standing 18.3% below the same month one year ago.
“The plunge is payback for additional homes sold in March and April,” observed Patrick Newport, U.S. economist for IHS Global Insight.
That payback is hitting the existing-home market as well. Sales of previously owned homes dropped 2.2% in May, according to data released this week by the National Association of Realtors. (Many economists had expected existing-home sales to rise slightly in May.)
In terms of new-home inventory, it remains low at 213,000. But at today’s sluggish sales pace, that translates into a supply of 8.5 months. Builders, of course, are exceedingly familiar with that challenge; the median time that a house has been on the market was 14.2 months in May, according to the Census data.
New-home prices, which can be a volatile stat to follow in this Census data, continue to erode. The median price of a new-home in May was $200,900, compared to $179,600 for an existing home.
Alison Rice is senior editor, online, at BUILDER magazine.