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Could New Home Sales Continue to Rise?

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New home sales rebound in May

The US Census Bureau and Department of Housing and Urban Development report monthly data on the number of new homes sold in the United States. This report can help investors assess demand for new homes. According to the Census Bureau’s website, it takes six months to establish a trend in new home (DHI) sales, and there was no change in the new home sales (ITB) trend, according to the June report.

As per the recent report, new single-family homes (XHB) sold in May were at a seasonally adjusted rate of 689,000 units, an increase of 6.7% from the revised April rate of 646,000 units. The annual rate, however, was up by 14.1% as compared to the May 2017 estimate of 604,000 units.

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Average price and inventory

The Census Bureau reported that the median sales price for new homes sold in May was $313,000 as compared to $312,000 in April, and the average home price in May was $368,500 as compared to $407,300 in April. The highest percentage of homes (FTY) sold was in the price range of $200,000 to $400,000. The reduction in tax allowance for home prices above $750,000 has limited the impact on the housing market, as there is a limited number of buyers in that segment.

Inventory trends of new homes

The inventory level of new homes (REM) has been increasing and is up 10.2% as compared to the same period in the previous year. This level, however, is below the historical average, as the completed home inventory is at the lowest level in 20 years, indicating that there is further room for the new home market to grow.

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