Sales of new single-family U.S. homes again defied predictions of a slowdown in May and rose 4.6%, according to a government report Monday that signaled resilient demand in the important housing sector.
The pace of new-home sales rose to a seasonally adjusted 1.23-million-unit annual rate from a downwardly revised 1.18-million-unit pace in April, the Commerce Department said.
The report, which adds to evidence that the housing market is not cooling as quickly as some economists had believed, came just days before the Federal Reserve considers interest rates at a policy meeting Wednesday and Thursday.
The Fed is widely predicted to raise interest rates by a quarter point.
“On the surface, it looks like a strong number, but beneath the surface the [housing] market is cooling substantially,” said Mark Vitner, senior economist at Wachovia Securities in Charlotte, N.C.
“The real question is, will the Fed look past this appearance of strength in the housing market?”
The report follows data last week that showed a stronger-than-expected 5% increase in May U.S. housing starts. The Commerce Department earlier Monday revised upward data for housing permits, showing that they fell just 1.4% in May, compared with an initially reported 2.1% fall.
For Monday’s data on single-family home sales, economists polled by Reuters were expecting sales to slow to a 1.15-million-unit pace from an originally reported 1.2-million-unit rate in April. The March sales pace also was revised downward to a 1.11-million-unit rate from a previously reported 1.14-million pace.
“On the whole, this is a comforting report to those worried about the housing market there. There is no sign of a precipitous decline in demand. This is more consistent with a moderation than a steep loss,” said Richard DeKaser, chief economist at National City Corp. in Cleveland.
Still, compared with a year earlier, the May sales pace was down 5.9%.
The May median sales price for new single-family homes fell 4.3% from April to $235,300, a figure that was nonetheless 3.1% above the year-earlier median price of $228,300.
The closely watched supply of new homes for sale at the end of May fell 0.7% to 556,000 from a downwardly revised 560,000 in April, which was a record level.
The homes-for-sale figure represented a supply that should last 5.5 months at the current sales pace, compared with a 5.8-month inventory in April.
Also Monday, the Federal Reserve said in its 2005 report that the U.S. economy should perform well this year and in 2007 despite higher energy prices.
“So long as energy price increases slow, as is suggested by futures prices, this restraint should diminish as 2006 progresses,” the Fed said.