A home under construction in Florida
Nationwide sales of new homes soared in May, thanks almost entirely to activity the South.
Purchases of new single-family homes rose 6.7 percent last month to a seasonally adjusted annual rate of 689,000, according to the Commerce Department. That’s much higher than the 0.9 percent expected by economists, according to the Wall Street Journal.
The growth is largely thanks to the 17.9 percent rise in sales in the South, which is the largest gain since the end of 2014. Rates were flat in the Midwest and declined in both the Northeast and the West.
The monthly totals also include a caveat. The margin of error for May was 14.1 percent. The numbers also only reflect sales of new homes, which makes up just a fraction of the rate for previously-owned home sales. Those have recorded declines so far this year, compared to the same period in 2017.
The National Association of Realtors found that sales for existing single-family homes, townhomes, condominiums and co-ops fell 0.4 percent in May to a seasonally adjusted annual rate of 5.43 million. The association attributed the decline to rising mortgage rates and prices.
Mortgage rates are expected to rise quicker than expected in the coming years, as the Federal Reserve looks to raise the benchmark interest rate four times — instead of the previously anticipated three — in an attempt to curb inflation.
As rates rise, more buyers are turning to nonbank mortgage lenders, which claim they can offer better deals to buyers than traditional banks saddled with debt and restrictive regulations related to the subprime mortgage crisis. In South Florida, nonbank lenders are leading banks in originations. While potentially good for borrowers in the short-term, some skeptics worry about the lack of regulation and liquidity of those nonbank lenders. [Wall Street Journal] — Dennis Lynch
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