As per the latest data from the United States Commerce Department, new home sales figures in the country witnessed an unexpected surge in May 2023, thereby reaching the highest rate in over a year despite efforts to cool down the economy.
As per the government data, the graph of new property sales has been on an upward trajectory in recent months, with a reported lack of inventory elsewhere pushing buyers into the market.
May 2023 sales of new single-family houses jumped by 12.2% over the April figures, to a seasonally adjusted annual rate of 763,000, the Commerce Department stated.
That defied expectations of a decline, and is markedly higher than April’s revised rate of 680,000, officials stated further.
Compared with the same period in 2022, new home sales in May were 20% higher.
The median price of new homes sold has also picked up to USD 416,300 in May 2023.
“The existing home market is effectively frozen until mortgage rates drop considerably,” said Ian Shepherdson and Kieran Clancy of Pantheon Macroeconomics in a recent study, reported AFP.
“A fall in rates would enable potential sellers to take action without incurring a massive increase in mortgage payments,” the study added further.
“Once that happens, existing home inventory will spike from its currently depressed level, sales volumes will rise, and prices will fall,” the Pantheon economists said.
New home sales rose in every region of the country, the data suggested. Some of the largest gains were seen in the Northeast, South and West.
A favourable mix of low inventory, builder incentives and resilient demand reportedly contributed to the rise.
Oxford Economics’ US economists, however, didn’t seem that impressed by the trend, as they predicted that the housing sector might face another hiccup in the coming days.
“We don’t think the pace of sales can be sustained… and we expect new home sales to lose some momentum as the economy enters a recession and the labour market softens,” wrote economists Nancy Vanden Houten and Ryan Sweet in a note.
During an interaction with CNN, Raymond James chief economist Eugenio Aleman said, “If the housing market continues to accelerate, it could force the Federal Reserve to return to its interest-hiking ways.”
“The May new home sales report also shows that the Federal Reserve may want to increase interest rates higher because current mortgage rates don’t seem to be high enough to slow down the sector and could pose a threat to the current disinflationary process going forward,” the expert stated further.
After a string of 10 consecutive rate hikes, the United States Federal Reserve in June 2023 opted against increasing interest rates.