By JOSH BOAK
AP Economics Writer
WASHINGTON (AP) — The number of new houses being sold in the U.S. increased by 6.7 percent in May, driven mostly by purchases in the south.
The Commerce Department said on Monday that new homes sold last month at a seasonally adjusted annual rate of 689,000, up from 646,000 in April. The South reported a monthly sales increase of 17.9 percent, whereas sales were flat in the Midwest and fell in the Northeast and West.
For the first five months of this year, new-home sales rose 8.8 percent as a solid job market and shortage of existing houses boosted demand. In a sign that buyers are eagerly seeking out properties, there was a 17.4 percent surge last month in sales of houses that weren’t even built yet.
“With fewer buying options among existing homes, homebuyer demand is shifting towards new builds,” said Ben Ayers, senior economist at the insurance company Nationwide.
Buyers are also faced with additional pressures as house values are generally rising faster than incomes and average 30-year mortgage rates have risen to 4.57 percent from where they were a year ago, at 3.9 percent. Both of these factors are increasing the monthly cost of house-loan repayments.
Aaron Terrazas, a senior economist at the real estate firm Zillow, said that sales growth was strong, yet construction was still occurring at a slow place even as the population continues to grow.
“We’re building roughly 2.7 homes for every 1,000 Americans – well below historic averages form the 1980s and 1990s of about 4.2 homes per 1,000 residents,” Terrazas said.
Still, the government’s numbers on new-home sales can fluctuate greatly from month to month, especially when any growth or setbacks are concentrated in one region of the country. May’s median sales price dropped 3.3 percent from a year ago to $313,000. But the decline was largely a result of sales being concentrated in the South, where new homes are generally cheaper.