New-home sales in the U.S. rose more than expected in May, with record-low mortgage rates pulling buyers back into a housing market that froze up during the pandemic.
Purchases of single-family houses climbed 16.6%, the second-largest monthly advance since 1992, to a 676,000 annualized pace, government data showed Tuesday. The median forecast in a Bloomberg survey of economists was 640,000.
Homebuilders are welcoming back buyers after social-distancing rules across much of the U.S. kept them on the sidelines in March and April. Newly built properties are gaining favor because previously owned houses are in short supply. Record-low interest rates have put new homes within reach of more buyers.
The sales results are further evidence that housing is proving to be a bright spot in the economy even with unemployment at levels not seen since the Great Depression.
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“The fact that we’re reaching the levels we are in a pandemic and a recession is unbelievable,” said Ali Wolf, chief economist at Meyers Research. “Low rates have tilted the equation toward some buyers actually being able to afford a new home.”
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In a sign of recent strength, the annualized pace of new homes selling in May before the start of construction was about 184,000, the highest in three months. The inventory of new houses for sale was the lowest since July 2018.
Purchases in the South, the largest U.S. region, increased 15.2% to a seven-month high. They jumped 29% in the West, the fastest pace in three months, the government’s data show.