May 2022 saw an increase in new home sales and many say it is due to the rush of buyers to buy before the June interest rate increase. May saw a 10.7% increase to a 696,000 seasonally adjusted annual rate from April in sales of newly built single-family homes. This is based on the number of homes that would sell if the same pace continued over the next 12 months. New home sales though are down 10.6% in 2022 on a year-to-date basis.
For a sale to count, a new home sale only occurs when a sales contract is signed or a deposit is accepted. The new home can be in any stage of construction and does not have to be completed.
“Though new home sales registered a solid increase in May, we expect sales to decline in June following the Fed’s action to significantly raise interest rates in an effort to cool the economy and ease inflation,” said Jerry Konter, chairman of the National Association of Home Builders (NAHB) and a home builder and developer from Savannah, Ga. “High construction costs and rising mortgage rates are pricing many buyers out of the market. Only 10% of new homes were priced below $300,000 in May, compared to 23% a year ago.”
“While sales were up in May, the 696,000 pace was 5.9% lower than a year ago and new home sales on a year-to-date basis are down 10.6% thus far in 2022,” said NAHB Chief Economist Robert Dietz. “Moreover, the months’ supply measure is elevated at 7.7, but existing home inventory remains very tight and this supports demand for new construction.”
The inventory of new single-family homes is still up at a 7.7 months’ supply which is up 42.6% over 2021. With the inventory up, the median sales price did go down to $449,000 in May from $454,700 in April. This decrease can be blamed on higher construction and development costs.