The Census Bureau reported new home sales for May at a seasonally adjusted annual rate of 689,000 units. This was above forecasts, but previous months were revised lower. According to Census figures the median price of a new single-family home sold in May was $313,000, more than $10,600 LESS than last year’s median price. The average price of a new home contracted in May was $368,500, or $9,900 less than May of last year.

Putting the May numbers from Census into context with local new home sales, the numbers look plausible. May was a pretty good month for new home sales in the DFW area. The key to keeping those sales volumes trending upward is affordability. With the lower median and average prices, builders were able to move more new homes.

If builders have difficulty bringing more affordable products to the market sales volumes will likely stagnate as they meet the headwind of higher mortgage interest rates. This has been the general trend so far this year. It will be interesting to see how the summer selling season wraps up. Mortgage rates appear to be backing off from recent highs, so that could provide some lift for additional sales.

New home sales have seen a nice steady upward trend following the Great Recession. Now that home prices are once again near peak levels of UNaffordability, home builders are being faced with some serious challenges. This is why you see the stock of many new home builders trending lower this year. Regardless of the continued optimism they are selling the real market is beginning to sniff out those headwinds.

On a non-seasonally adjusted basis there were 65,000 new homes sold during the month of May. This was more than the 57,000 homes sold last year, but roughly half of the peak for May seen back in 2005.