May 2018 New Home Sales

Sales of existing homes moved higher in May according to the Census Bureau.  On a seasonally adjusted basis, transactions reached 689,000 units.  This demonstrates an increase of 6.4 percent from April and 14.1 percent above the tally from a year ago.  New home sales are helping push our economy ahead.

Transactions may be up, but falling prices probably helped the volume.  The median-priced home set they buyer back $313,000 which is a decline of 1.7 percent since April and 3.3 percent in the past year.   An average priced home fell much more; dropping 9.5 percent, the mean cost of home hit $368,500 after $407,300 in April.

Inventories were nearly unchanged.  Slipping 1,000 units, there are now roughly 299,000 new homes for sale in America.  At the current sales rate, this represents 5.2 months of supply, falling from 5.4 months in April.

New home sales are notoriously volatile.  The margin of error in the statistics is so large that it is sometimes impossible to know if there was any change in the data.  For instance, May’s monthly uptick in sales of 6.7 percent came with a margin of error of ±14.1 percent.  Statistically speaking, this means the Census Bureau cannot quantify whether there was any change from a month ago.  Kind of head scratching, right?

Atlas watches this for one primary reason: it adds to gross domestic product (GDP).  While the transaction volume for new homes is about one-tenth the size of the existing homes market, these dwellings are new, so their sales add directly to GDP.  A purchase of an existing home does not get included in the official output figures because they are technically a used item.  For now, GDP is benefitting from new home sales, adding to the evidence that America’s economy is still expanding.