New home sales were at a seasonally-adjusted annual rate of 623,000 in May, a decrease of 13.7% compared with April and down 6.3% compared with May 2024, according to estimates from the U.S. Census Bureau and U.S. Department of Housing and Urban Development.
The drop in new home sales comes despite an increase in inventory: There were about 507,000 new homes available for sale, as of the end of May, an increase of 1.4% compared with April and up 8.1% compared with May 2024.
That’s about a 9.8-month supply at the current sales rate.
The median sales price of a new home sold in May was $426,600 – an increase of 3.7% compared with April and up 3.0% compared with May 2024.
The average sales price of a new home sold in May was $522,200, an increase of 2.2% compared with the previous month and an increase of 4.6% compared with a year earlier.
“New-home sales tumbled in May, marking the steepest monthly decline since May 2022,” says Odeta Kushi, deputy chief economist for First American, in a statement. “Mortgage rates increased in May, reducing affordability, while elevated macroeconomic uncertainty continues to keep buyers on the sidelines.”
“Builders are increasingly pessimistic about the future of new-home sales,” Kushi says. “Home builder sentiment has dropped to its lowest level since December 2022. Within the broader index, expectations for single-family sales over the next six months have declined to their lowest point since November 2023.”
“The drivers behind builders’ increased pessimism are multi-faceted,” she adds. “Elevated mortgage rates impact buyer affordability and result in higher financing costs for builders, who are already grappling with higher construction input costs. While the cost of some materials, such as lumber, have come down from pandemic-era highs, other construction inputs remain elevated.”
Photo: Amanda Smith