Sales of new single-family houses declined month over month in May, following a trend also showing in the sales of housing of all types.
In their monthly report released today (June 23), the U.S. Census Bureau and Department of Housing and Urban Development (HUD) said sales of new single‐family houses in May 2021 were at a seasonally adjusted annual rate of 769,000.
That’s 5.9% below the revised April rate of 817,000 but 9.2% higher than the May 2020 estimate of 704,000, the agencies said. The median sales price of new houses sold in May 2021 was $374,400. The average sales price was $430,600.
That report follows by a day the National Association of Realtors’ monthly report showing existing-home sales had slipped slightly for the fourth month in a row but were still a resounding 44.6% over last May. The median price for existing homes reported there was $350,300, a jump of 23.6% from $283,500, a record high reached after 111 consecutive months of year-over-year gains since March 2012.
Housing inventory still rising in a trajectory seen continuing
Both reports found evidence of growing inventory. The NAR said that total housing inventory at 1.23 million units of all types was up 7% from April to May but still 20.6% down from a year ago. Unsold inventory was at a 2.5-month supply at the present sales pace, a sliver above April's 2.4-month supply but down from 4.6 months last year.
As for new construction, the Census/HUD report says the seasonally adjusted estimate of new houses for sale at the end of May was 330,000. This represents a supply of 5.1 months at the current sales rate.
Ruben Gonzalez, chief economist at nationwide brokerage Keller Williams, says things are likely to keep going this way for a while. “We see new-home sales and construction in general trending about the historical average at least through the end of 2021,” he said.
That reflects the sentiment of NAR chief economist Lawrence Yun. "The market's outlook … is encouraging," he said in the trade group’s Tuesday announcement. "Supply is expected to improve, which will give buyers more options and help tamp down record-high asking prices for existing homes."
Falling lumber prices add to builder optimism
There also are other factors that could help affordability and supply, Gonzalez said. “The fall in lumber prices was good news across the housing industry, and we have hopefully moved past peak lumber prices and builders will be able to feel more confident putting product on the market with less uncertainty about costs,” the Keller Williams economist said.
“These restrictive conditions in the existing home market should continue to drive new construction, as well as strong demand driven by the continued economic recovery and sustained low interest rates,” Gonzalez added.
The Millionacres bottom line
It can be tempting to see continuing declines in month-over-month price gains and construction metrics as signs of a softening residential real estate market, but it also just seems like it’s time for the heat in the housing market to turn from a boil to a simmer. And there’s always opportunity for investors who can get the right deal at the right price, even if you might have to lower profit expectations a bit if you’re in it for a flip or a rental.