Home Sales Demand Increased in the South Despite Higher costs

Housing starts rose as the summer approaches despite high selling rates and low home inventory.

A small portion of the overall U.S. home sales, purchases of newly built single-family homes rose by 6.7% to a seasonally adjusted rate of 689,000 in May from the month before, according to the Commerce Department on Monday.

Yet, the previously owned homes sales slid down from 12 months before compared to the first four months of the year. This represents the majority of the housing market, indicating that house purchases will return to being neutral. Meanwhile, the pace of new home sales still maintains below than the earlier high prices prior to the two-year financial crisis and recession in 2007.

A senior economist at Nationwide said that the rise in new home sales could be related to the record low inventory in the existing houses in the market. Since there a fewer buying options among existing houses, there was a shift in the demand of housing buyers to newly built houses. More housing construction as it increases with the expansion of housing starts up in May.

New home sales grew by 6.7% with a margin of error of 14.1 percentage points, however, the long-term demonstrated growth compared last year. Yet, the New house sales data can be volatile.

Specifically, sales in the Southern regions influenced last month’s growth. House start purchases gained 17.9% in the said region, which has been the biggest gain since the end of 2014. However, sales in the Northeast and West dropped while purchases were dull in the Midwest for the month of May.

Moreover, housing market inventory has been tight which pushed the prices higher and causing potential buyers to leave the market. Als, limited construction labor and costly materials needed, as well as, mortgage rates affected the housing market.