US new home sales rise, median price surges to record high

A view of single family homes for sale in San Marcos California

The National Association of Realtors reported Thursday existing home sales, a much larger market than new homes, increased 1.1 percent in May to a seasonally adjusted annual sales rate of 5.62 million. That followed a 7.9 percent drop in sales in April which was the biggest monthly decline in eight months.

The rebound in May sales had been expected following the big April drop.

New single-family home sales in the USA grew by 2.9% month-on-month in May to reach an annualised rate of 610,000, according to the Department of Commerce.

The housing market has been bolstered by continued job growth. Sales were up 8.9% on a year-on-year basis in May.

"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", said Michael Feroli, an economist with J.P. Morgan. "As home sales continue to pick up, that's further evidence that we have a supply problem, not a demand problem". Housing starts declined for the third straight month in May, as builders expressed concern about tight availability of lots and a labor shortage. The unemployment rate fell to a 16-year low of 4.3% in May and mortgage rates are still favorable by historical standards.

Meanwhile, in non-seasonally adjusted terms the average price of a new home in the States jumped from 310,200 in April to 345,800 for May. U.S. stocks were trading modestly higher while prices of U.S. Treasuries edged up.

Economists polled by Reuters had forecast new home sales rising 5.7 percent in May to a pace of 600,000 units from the previously reported rate of 570,000 units.

The rebound in new home sales came as sales in the West spiked by 13.3% to a rate of 162,000 and sales in the South surged up by 6.2% to a rate of 360,000. April's sales pace was revised up to 593,000 units.

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