Home Sales Surge; Prices Back on Upswing

Prospective home buyers seem to have adjusted to rising interest rates, as fresh Census data showed that new home sales in May rose 12.2 percent month-over-month.

Home builder confidence has been increasing over the past few months, and for good reason, according to Zillow.com:  New home sales have jumped out of the water to get the new construction industry back on track to build much needed inventory for this undersupplied market.

“This spring shopping season has buyers searching for listings and affordability–both of which can be found in new construction–with many builders offering incentives and fresh inventory,” said Nicole Bachaud, a senior economist for  real-estate analytics firm. “This has brought a resurgence to the new construction industry with sales rising and home builder confidence climbing. This momentum is keeping up even as sales in the existing home market might be showing signs of growing, but new inventory is still way down and prices are going back up, leaving buyers in the existing home market with little to choose from.”

After a year-over-year decline in April, home prices in the U.S. ticked up last month as more buyers, despite higher interest rates, approach the market. Existing home sales picked up slightly in May, perhaps as a response to home prices rising once again, signaling affordability might continue to worsen in the future and making now look like a relatively better time to buy for many potential buyers.

“April home prices were lower than a year ago,” Bachaud said. “However, last April is difficult to compare to this year because at the time, interest rates were just about to pick up and there was a dash to the finish line for many buyers and sellers to finalize transactions before increased rates became unaffordable.”

Looking more at the monthly trends in home prices, Bachaud said, “we can see that this spring is finally settling back into the relatively normal rhythms of the housing market. Home prices are rising in the spring as more home buyers are shopping, and home prices will likely continue this trend until we enter the cooling of the market in the fall.”