The numbers: New-home sales ran at a 626,000 seasonally adjusted annual rate in May, the Commerce Department said Tuesday .
The MarketWatch consensus forecast was for a 669,000 pace.
What happened: Sales fell 7.8% compared to April, but that month’s number was revised up. May sales were 3.7% lower than a year ago. At the current pace of sales, it would take 6.4 months to exhaust available supply, slightly more than the 6 months that’s normally considered a market evenly balanced between supply and demand.
The median price of a new home sold in May was $308,000, 2.7% lower than a year ago.
Big picture: The housing market isn’t looking all that robust right now. Sales have flatlined for nearly a year. While existing-home sales perked up in May, it remains to be seen if that trend can be sustained.
The Commerce Department’s data on new residential construction are based on small sample sizes and notoriously prone to hefty revisions in later months. In the year to date, sales are 4.0% higher than the same period a year ago.
What they’re saying: “We continue to see builder business as reasonably healthy this spring but believe our data shows that consumers remain price-sensitive,” said analysts at BTIG Research in their monthly BTIG/Homesphere Builder Survey , released about a week before Commerce’s data. “As such we believe industry margins will remain under some pressure.”
“Few new homes are being built in the more affordable $150,000 to 250,000 range, though builders are doing better in that area,” said Robert Frick, corporate economist at Navy Federal Credit Union. “The number of new homes sold that are under construction is increasing as smart home shoppers are working with builders to lock in house earlier in the process, which can give them the opportunity to customize a home to fit their budgets. Overall, the number of new homes being built remains far below historical averages, meaning there is no major relief in sight.”
Market reaction: Concerns about margins aren’t trickling through to stock prices yet. Shares of D.R. Horton, Inc. /zigman2/quotes/202032328/composite DHI -1.09% are up 29% in the year to date, while the SPDR S&P Homebuilders ETF /zigman2/quotes/202739297/composite XHB +0.60% has risen about 27%.
And on Tuesday, Lennar Corp /zigman2/quotes/202536373/composite LEN +0.45% reported second-quarter earnings that handily beat analyst expectations. The company said home deliveries were up 5.2% compared to a year ago, a much stronger showing than it had anticipated. But after executives provided weak guidance, the stock slid nearly 3% in midday trading.