Mortgage rates that averaged 7.06% in May, according to Freddie Mac, the highest monthly average since last November, impacted new home sales last month.
Sales of newly built single-family homes in May fell 11.3% to a seasonally adjusted annual rate of 619,000 from a sharply revised reading in April, based on data from the U.S. Department of Housing and Urban Development and the U.S. Census Bureau. The pace of new home sales in May is down 16.5% from a year earlier and is the lowest since November 2023.
“Persistently high mortgage rates in May kept many prospective buyers on the sidelines,” said Carl Harris, chairman of the National Association of Home Builders (NAHB) and a custom home builder from Wichita, Kan. “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,” said NAHB Chief Economist Robert Dietz.
A new home sale occurs when a sales contract is signed or a deposit is accepted. The home can be in any stage of construction: not yet started, under construction or completed. Adjusting for seasonal effects, the May reading of 619,000 units represents the number of homes that would sell if this pace continued for the next 12 months.
New single-family home inventory in May remained elevated at 481,000 units, up 12.9% compared to a year earlier. This represents an estimated 9.3 months’ supply at the current building pace due to ongoing shortages of resale homes.
Due to declines in new home size and some builders' use of incentives, the median new home price fell to $417,400—down almost 1% from a year ago.
Regionally on a year-to-date basis, new home sales are up by 6% in the Northeast, by 25.2% in the Midwest and by 6.3% in the West; however, they are down by 7.6% in the South.
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