The U.S. housing market performed above expectations in May, a week after the Federal Reserve showed confidence that the economy will weather whatever inflation arises, even as wages increase, joblessness continues to decline and consumers remain upbeat.
The Commerce Department said Friday that new home sales rose 2.9 percent in May to a seasonally adjusted rate of 610,000 units. The government also revised April's sales pace upward to 593,000 units from 569,000.
Sales rose 13.3 percent in the West and 6.2 percent in the South, which Reuters said accounts for a large share of the housing market.
During the past year, home sales in the West are up 14.1 percent, U.S. News & World Report said, and they are up 15 percent in the South. The Northeast has been flat since May of 2016, and sales in the Midwest have fallen 23.6 percent.
"The 12-month rolling total of new home sales, compared to the 50-year average, looks like there's a lot more room to grow when taking into account the size of the U.S. population," Ralph McLaughlin, chief economist at real estate hub Trulia, said Friday in a research note that U.S. News & World Report cited in a story about the results. "New home sales per 1,000 U.S. households was five [sales per household] in May, which is only 68.8 percent back to normal."
The government said the median house price rose to a record high of $345,800 in May, up from $310,200 in April. The average sales price last month was $406,400, and that also was a record.
"While the data quality of the new home sales report is notoriously poor, the general picture from this report and the existing-home sales report is one of solid housing demand in the important spring selling season," Michael Feroli, an economist with J.P. Morgan, told Reuters.
Earlier in the week, the National Association of Realtors reported that existing-home sales bounced back in May after “a notable decline” in April as all major regions of the country except the Midwest had sales increases.
Completed transactions climbed 1.1 percent, to a seasonally adjusted annual rate of 5.62 million, from a downwardly revised 5.56 million in April. May’s sales pace was 2.7 percent above a year earlier and was the third-highest during the past year.
The trade group said low inventory levels helped to push the median sales price to a new high while pushing down the median number of days that a home is on the market to a new low.
"The job market in most of the country is healthy and the recent downward trend in mortgage rates continues to keep buyer interest at a robust level," Lawrence Yun, the NAR’s chief economist, said in a statement.
"Those able to close on a home last month are probably feeling both happy and relieved. Listings in the affordable price range are scarce, homes are coming off the market at an extremely fast pace and the prevalence of multiple offers in some markets are pushing prices higher."
The trade group said the median existing-home price for all housing types was $252,800 in May, surpassing June of 2016 ($247,600) as the new peak median. The median price was up 5.8 percent from May of last year ($238,900) and marked the 63rd straight month of year-over-year gains.
Economy watchers this week will see how closely the improvements in the housing market compare with fresh readings on consumer confidence. The Conference Board will release its Consumer Confidence Index for June today and the University of Michigan will issue its final Consumer Sentiment Index for the month on Friday.
The Conference Board’s index declined in April and May after rising in March to its highest level since 2000 in the wake of Donald Trump’s election as president, but Lynn Franco, the board’s director of economic indicators, said in a statement that accompanied the May report that consumers “overall remain optimistic that the economy will continue expanding into the summer months.”
The University of Michigan index fell to 94.5 early this month from 97.1 at the end of May, but Richard Curtin, chief economist of the university’s Surveys of Consumers, said at mid-month that the drop since June 8, when former FBI director James Comey testified before Congress and was critical of Trump, had been an even larger 11 points, from 97.7 to 86.7.
Curtin did note that that only a few consumers spontaneously referred to Comey or his testimony when they were asked to explain their views.
“Importantly, the decline was observed across all political parties, but the loss in confidence among self-identified Republicans since June 8th was larger than among Democrats (9.2 vs. 6.8 index points), with independents showing the greatest falloff (11.5 index points),” Curtin said in a statement.
Also on Friday we will see reports from the Commerce Department on personal income and consumer spending for May and the Labor Department will report on core inflation for that month.
Taken together, the consumer confidence and spending reports will help to show whether the Fed’s belief in U.S. consumers is reflective of the way Americans now feel about themselves.