U.S. new home sales surge in May for third straight month

U.S. new home sales rose 12.2% to an annual rate of 763,000 in May, from a revised 680,000 in the prior month, the Commerce Department reported Tuesday. 

The number is seasonally adjusted, and refers to how many homes would be built over an entire year if builders continue at the same pace every month.

The jump exceeded expectations on Wall Street. Economists had forecast new home sales to total 675,000 in May.

The data from April was revised significantly. New home sales rose to a revised 680,000 in April, compared with the initial estimate of a 4.1% increase to 683,000.

The new home sales data are volatile month-on-month and are often revised.

Key details: The median sales price of a new home sold in May fell to $416,400 from the month before. 

The supply of new homes for sale fell 11.8% between April and May, equating to a 7-month supply. 

Regionally, the Northeast and West led the nation in new home sales, posting increases of about 17% each.

Overall, sales of new homes are 20% compared to last year.

Big picture: The housing market may be stuck in a rut over the lack of inventory and high mortgage rates, but home builders are thriving as buyers flock to new construction where they are finding more options.

Builder confidence over future sales is high, as homeowners continue to hold on to ultra-low mortgage rates they refinanced into during the pandemic. Construction of new homes in the U.S. jumped nearly 22% in May 2023.

Market reaction: Stocks
DJIA,
+0.32%

SPX,
+0.39%
were up in early trading on Tuesday. The yield on the 10-year Treasury note rose above 3.73%.

Shares of builders, including D.R. Horton, Inc.
DHI,
+2.22%,
Lennar Corp
LEN,
+2.63%,
PulteGroup Inc.
PHM,
+2.56%,
and Toll Brothers Inc.
TOL,
+2.35%
were mixed up the morning trading session.