The lift off for housing is appearing more and more like it's straight up. New home sales rose 2.2 percent in May to an annual rate of 546,000 which is 6,000 above the high end Econoday forecast. Add to this is a 27,000 upward revision to the two prior months with April now standing at 534,000 for a big 8.1 percent monthly gain.
The surge in sales is making for a strong seller's market with supply relative to sales down to a very thin 4.5 months vs 4.6 months in April. Total new homes on the market stand unchanged at 206,000. The lack of supply risks becoming acute and will doubtlessly speed up construction activity led by permits which, in data posted last week, have been jumping.
Lack of supply will prove to be a positive for sales prices, which however, are down in the latest report, 2.9 percent lower to a median $282,800. Year-on-year, the median price is down 1.0 percent vs the year-on-year sales gain of 19.5 percent in a mismatch that points to price acceleration ahead.
Regional sales data show a strong 13.1 percent rise in the West where year-on-year sales are up 25.5 percent. The South, which is larger than all the other regions combined in this report, has the strongest year-on-year rate at 33.3 percent though monthly sales in May dipped 4.3 percent. Sales have been soft in both the Northeast and Midwest where year-on-year rates are in the negative column though the Northeast is showing monthly strength in this report.
Yesterday's existing home sales report was very positive as is today's report, both of which add to other data that put housing at the top economy right now for a sector that can offset stubborn weakness in the manufacturing economy.