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New homes sales rebounded 2.9 percent in May

In this Thursday, June 1, 2017, photo, builders work on the roof of a home under construction at a housing plan in Jackson Township, Butler County, Pa. On Friday, June 23, 2017, the Commerce Department reports on sales of new homes in May. (AP Photo/Keith Srakocic)

Builders work on June 1 on the roof of a house under construction at a housing plan in Jackson Township, Pa. The federal Commerce Department reported on Friday that sales of new homes increased in May. (AP Photo/Keith Srakocic)

By MARTIN CRUTSINGER
AP Economics Writer

WASHINGTON (AP) — Sales of new homes rebounded in May, helped by strong sales gains in the South and West.

Sales of new single-family homes rose 2.9 percent last month to a seasonally adjusted annual rate of 610,000, the Commerce Department reported Friday. That followed a 7.9 percent drop in sales in April, which marked the biggest monthly decline in eight months.

Sales gains of 6.2 percent in the South and 13.3 percent in the West overcame big declines of 25.7 percent in the Midwest and 10.8 percent in the Northeast. The Midwest drop was the largest in that region in nearly three years.

The median price of a home sold last month rose to a record of $345,800, up 16.8 percent from a year ago. Prices have been increasing as demand has outstripped supply, in part because of a shortage of available building lots.

The rebound in sales in May had been expected following the big drop in April. Sales of previously owned homes also rose last month.

The National Association of Realtors reported Thursday that sales of existing home, for which there is a much larger market than for new homes, increased 1.1 percent in May to a seasonally adjusted annual sales rate of 5.62 million.

Economists noted that the level of sales in May was the highest seen since March and that the government has also revised up its figures charting activity for the past three months.

“This report, along with the larger existing home sales … gives a much better tone” for the economy in the current quarter, Jennifer Lee, senior economist for BMO Capital Markets, said in a research note.

The demand for homes reflects a strong labor market, which has seen steady job gains and sent the unemployment rate down to a 16-year low of 4.3 percent.

The number of homes for sale rose by 1.5 percent in May to 268,000, meaning there was 5.3 months’ worth of supply if the pace of sales seen in May were to continue. That was the same supply as was seen in April but up from a supply of 4.9 months in March.

Copyright 2017 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed.

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