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U.S. New Home Sales Unexpectedly Show Significant Rebound In May

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New home sales in the U.S. unexpectedly showed a significant rebound in the month of May, according to a report released by the Commerce Department on Friday.

The report showed new home sales surged 10.7 percent to an annual rate of 696,000 in May after plunging 12.0 percent to an upwardly revised rate of 629,000 in April.

The spike surprised economists had expected new home sales to dip 0.5 percent to an annual rate of 588,000 from the 591,000 originally reported for the previous month.

The unexpected rebound came as new home sales in the West skyrocketed 39.3 percent to a rate of 202,000, while new home sales in the South soared 12.8 percent to a rate of 413,000.

On the other hand, the report showed new home sales in the Midwest plunged 18.3 to a rate of 58,000, and new home sales in the Northeast dove 51.1 percent to a rate of 23,000.

"Despite the upside surprise in May, we expect new home sales to lose momentum going forward as the sharp increase in mortgage rates takes a toll on homebuying affordability, pricing many buyers out of the market," said Nancy Vanden Houten, Lead U.S. Economist at Oxford Economics. "We look for new home sales to average just above 600k in the second half of 2022."

The Commerce Department also said the median sales price of new houses sold in May was $449,000, down 1.3 percent from $454,700 in April but up 15.0 percent from $390,400 a year ago.

The estimate of new houses for sale at the end of May was 444,000, representing 7.7 months of supply at the current sales rate. The month of supply is down from 8.3 in April but up from 5.4 in May 2021.

On Tuesday, the National Association of Realtors released a separate report showing another steep drop in U.S. existing home sales in the month of May.

NAR said existing home sales plunged by 3.4 percent to an annual rate of 5.41 million in May after slumping by 2.6 percent to a revised rate of 5.60 million in April. Existing home sales fell for the fourth consecutive month.

Economists had expected existing home sales to tumble by 3.7 percent to a rate of 5.40 million from the 5.61 million originally reported for the previous month.

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