In spite of a 7.8% decrease in new home sales in May, the numbers for the first five months of 2019 are 4.0% above last year's pace. Once again, sliding mortgage rates and an increase in mortgage applications are receiving a lot of the credit for the positive news, as are, this time around, discounts put in place by builders.

Regionally, monthly sales were quite volatile. The West, which accounts for about 26% of total sales, dived 35.9%. The Northeast posted a 17.6% drop but the South, the largest market for new homes, was up 4.9% and the Midwest saw a 6.3% jump.

Reacting to the latest report, the Wells Fargo Economics Group stated, "We expect lower mortgage rates to continue to support the steadily improving trend in new home sales in coming months, however a surge in activity is unlikely."

The median home price fell 2.7% year-over-year. Inventory levels inched up 0.3% and the month's supply rose to 6.4 months during May. But overall, inventories are "significantly lower" than the second half of last year according to the economics group.

"Homebuilders have responded to strengthening entry-level demand and shifted their focus to building more affordable product," they commented. "However rising construction costs, especially for qualified labor, make building entry-level homes increasingly a challenge. A scarcity of new home construction at more affordable price points is likely impeding overall activity."