New Home Sales Tanked in May as Mortgage Rates Hovered Around 7 Percent 

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New home sales in May were at a seasonally adjusted annual rate of 619,000, a decrease of 11.3% compared with April and down 16.5% compared with May 2023, according to estimates from the U.S. Census Bureau and the U.S. Department of Housing and Urban Development.

The median sales price of a new home sold in May was $417,400.

The average sales price was $520,000.

As of the end of the month, there were about 481,000 new homes available for sale in the U.S. – about a 9.3-month supply at the current sales rate.

“Persistently high mortgage rates in May kept many prospective buyers on the sidelines,” says Carl Harris, chairman of the National Association of Home Builders (NAHB) in a statement. “However, significant unmet demand exists, and we expect mortgage rates to moderate in the coming months, which will bring more buyers into the market.”

“While new home inventory increased to a 9.3 months’ supply, due to a lack of resale homes for sale, the combined inventory for new and existing single-family homes remains lean at a 4.4 months’ supply according to NAHB estimates,” adds Robert Dietz, chief economist for NAHB.

Even builder incentives couldn’t break buyer malaise in May.

“Buyers seemed to have reached an inflection point in May, where even incentives from builders are no longer enough to overcome the challenge of rising mortgage rates,” says Odeta Kushi, deputy chief economist for First American, in a statement. “Mortgage rates drifted above 7 percent in June, contributing to pessimism among buyers and builders alike. While the new-home market has remained a relative bright spot in the housing market due to builders’ ability to offer incentives and bring buyers off the sidelines, they are not immune to the impact of higher rates.”

“As further evidence of this impact, builder sentiment fell to the lowest level since December 2023 in June, while single-family housing permits and starts posted monthly declines in May,” Kushi says. “However, there continues to be a shortage of existing homes on the market, mortgage rates have once again dipped below 7 percent, and median new-home prices have come down from recent peaks, which should support the new-home market.”

Photo: Alexander Andrews

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