For months, new home sales were one of the weakest spots in the U.S. economy, but Monday’s new home sales report sent a clear message to the markets: The U.S. housing market is heating up.
In May, new home sales climbed to a 369,000 annual rate, representing a 7.6% jump from April. Economists had expected new home sales to increase to just 350,000. New home sales have also jumped nearly 20% in the past year. There are currently enough new homes to supply the market for 4.7 months—compare this with May 2011, when there was a 6.6-month supply.
This follows on the coattails of a series of encouraging housing reports from last week:
- In May, building permits surged to 780,000—the highest level since 2008.
- Existing home sales for May weighed in at 4.55 million, beating the consensus estimate by 50,000. Even though existing home sales declined from April, they are still 9.6% higher than May 2011.
- May average home prices climbed to $182,600; in the past year they have advanced 7.9%.
- The National Association of Home Builder’s sentiment index rose to its highest level since May 20087
In addition, the best news by far was the building permits report, which helped to advance the Index of Leading Economic Indicators in May.
Clearly, we still have a ways to go before we’re back to normal, but this is consistent with a slow and steady gradual improvement in the sector—a good sign for the market as whole.