U.S. new-home sales jumped unexpectedly in May despite rising mortgage rates, while the median sales price declined.  

The pace of new single-family home sales rose 10.7% from April’s upwardly revised number to a seasonally adjusted, annual rate of 696,000, while the median sales price fell to $449,000 from April’s revised median house price of $454,700, the U.S. Census Bureau and the U.S. Department of Housing and Urban Development reported. Economists had been expecting new-home sales would fall to a rate of 588,000, according to Reuters. 

On a year-over-year basis, the pace of new-home sales in May was down 5.9%.    

“As pricing begins to show signs of softening and builder inventory increases, there is potential for sales to remain consistent at this level or possibly increase slowly through the summer — because the market remains under-built, and fewer households are putting their existing homes on the market,” RCLCO Real Estate Consulting principal Kelly Mangold said. “This decline in for-sale mobility may bode well for the rise of the build-for-rent sector, as an increasing number of households seeking a for-sale home may instead choose to rent a single-family home or townhome while they wait for market conditions to become more favorable.” 

The seasonally adjusted estimate of new homes for sale at the end of May was 444,000, representing a supply of 7.7 months at the current sales rate. In April, there were 437,000 homes for sale, representing an 8.3-month supply.       

By region, the number of new-construction homes sold was mixed, with month-over-month increases of 39.3% and 12.8% in the West and South, respectively, and decreases of 51.1% and 18.3% in the Northeast and Midwest, respectively. 

First American Deputy Chief Economist Odeta Kushi cautioned not to read too much into the surprise jump in sales. 

“The monthly increase in new-home sales beat consensus expectations, but new-home sales data is volatile and one month does not make a trend,” she said in a press release. “While the nation continues to face a housing shortage, new-home sales may slow as worsening affordability and higher construction costs take a toll on the new-home market.”