Housing is back on track following Wednesday's strength in existing home sales and today's very solid gain for new home sales which rose 2.9 percent to a 610,000 annualized rate that is near Econoday's top estimate. The report also includes a sharp 24,000 upward revision to April which now stands at 593,000.
The real surprise in the report is enormous strength in selling prices. The median surged 11.5 percent in the month to $345,800. The year-on-year increase is 16.8 percent which, however, is nearly double the 8.9 percent gain in actual sales.
This price traction is related not only to demand but also to supply of new homes which is very tight. New homes did move into the market during the month, up 1.5 percent to 268,000 units, but sales relative to supply are unchanged at only 5.3 months.
The two focused regions for home builders, the West and South, are the strengths in May. Sales in the West jumped 13 percent to a 162,000 rate while sales in the South rose 6.2 percent to 360,000.
But sales in the Midwest and Northeast, which are small regions for home builders, fell sharply with double-digit declines, down a monthly 11 percent for the Northeast to 33,000 and down 26 percent for the Midwest to 55,000.
And this report does come with a warning -- sample sizes are limited and wild revisions are routine. Housing data have been up and down this year but this report, backed by May's gain in existing home sales, points to a mid-quarter sales bounce for the sector, one that underscores high levels of employment and stimulus from low mortgage rates.
New home sales are perhaps the most volatile of any economic report, swinging from a 621,000 annualized rate in March down to a 569,000 rate in April. Econoday's consensus for May is right in the middle at 590,000 in a result that, when compared with the 3-month average of 606,000, would be healthy though still slightly below the recent trend.