WASHINGTON – The Commerce Department reports on sales of new homes in May at 10 a.m. Eastern on Thursday.
SALES SLIP: Economists forecast that new-home sales tumbled 9.5 percent last month to a seasonally adjusted annual rate of 560,000, according to a survey by the data firm FactSet. This setback would follow a sharp 16.6 percent jump in new-home sales in April to a rate of 619,000.
FOCUS ON QUALITY, NOT QUANTITY: New-home sales have rebounded from the depths of the housing bust, yet builders are increasingly focusing on the upper echelon of buyers. The greater shift to the luxury market means that fewer new homes are being constructed, but the new homes are selling at markedly higher prices. Job growth and ultra-low mortgage rates have helped drive the year-to-date increase in purchases of new properties.
The median price of a new home that sold in April was $321,100, a record high, up from $297,900 in March. The higher price point helps out builders' profit margins, but it also means marketing to a smaller pool of potential buyers and constructing fewer homes. Despite recent improvements in new-home sales, the rate lags the historical average of roughly 650,000 a year.
Nor has construction necessarily relieved supply pressures. Recent gains in home sales have been met with fewer existing homes coming onto market. Sales of existing homes reached a seasonally adjusted annual rate of 5.53 million, the best since early 2007. Yet the number of listings has collapsed. The number of listings has fallen 5.7 percent from a year ago, meaning prices are rising as homebuyers face fewer options.
Buyers have been able to cope with these prices thanks to low mortgage rates. Mortgage buyer Freddie Mac said the average 30-year fixed-rate mortgage fell to 3.54 percent last week from 4 percent a year ago.