New Home Sales: Surprise Strength

Bottom Line: New home sales were stronger than expected in May and prior months were revised higher. Sales over the last three months have averaged 669K and are 1.9% above the 6 month average of 656K, suggesting a continued positive trend. The months supply dropped moderately as sales rose and inventories rose. While existing home sales last week showed slower activity this new home sales data (based on contract signings rather than closings like existing home sales reports) reveals potential strength coming into the summer selling season. New Home Sales ROSE by 6.7% to 689k, after the prior month was revised lower to 646k. This compared with market expectations for an increase to 667k, from the unrevised April level of 662k. Sales are now 14.1% ABOVE their year ago level, -- but they are still 50.4% BELOW their July 2005 peak. The Inventory of Homes Available for Sale ROSE by 1.0% to 299k. Inventories are now 10.3% ABOVE their year ago level but still 47.7% BELOW their July 2006 peak level. Combined with the increase in sales, the Months' Supply dropped to 5.2 months from 5.5 months. This is modestly BELOW a normal level of 6.0 months and well BELOW its peak of 12.2 in January 2009. Home Prices FELL with median prices 3.3% BELOW their year ago level and with average prices 2.6% BELOW their year ago level.