In May, sales of new homes rose surprising economists who had been forecasting that housing would slow down because of rising mortgage rates.

The Commerce Department reported that sales of new single-family homes increased by 4.6% in May to a seasonally adjusted annual rate of 1.234 million units. The median price of homes sold did decline to $235,300, a drop of 4.3% from the April sales price.

Analysts are still looking for sales of both new and existing homes to fall by around 10 percent this year as rising mortgage rates crimp demand. The lowest mortgage rates in four decades helped to propel sales to five straight annual records.

The 4.6% increase in sales pushed the sales rate to the highest level since last December and followed increases of 5.9% in April and 7.3% in March. The previous months' increases had been helped by unusually mild weather.

Sales were up 6% in the South to an annual rate of 669,000. Sales rose by 5.3% in the West to an annual rate of 317,000 units and were up 2.7% in the Midwest to an annual rate of 190,000 units.

It would take 5.5 months to exhaust the current inventory of homes at the May sales pace. Many economists believe mortgage rates will continue to rise, approaching 7 percent by the end of the year. Analysts said whether the economy slows as expected and inflation pressures moderate would determine future Fed rate hikes.

By M. Sese
http://realestatepress.org