Sales of new single-family homes in the United States declined sharply in May, falling 13.7% from April to a seasonally adjusted annual rate of 623,000 units, according to new data released by the US Census Bureau, CNBC reports.
The decline brings monthly sales to a level 6.3% lower than the same period in 2024 and well below both the six-month and one-year sales averages.
The slowdown in new home purchases coincided with elevated mortgage rates, which hovered around 7% for most of the month. According to Mortgage News Daily, the average 30-year fixed mortgage rate started May at 6.83%, peaked slightly above 7%, and ended the month at 6.95%. These high borrowing costs appear to have deterred prospective buyers, as the new home sales figures reflect signed contracts, indicating a direct impact on demand during that time frame.
“The large fall in new home sales in May cancels out all of the positivity of the past couple of months and serves as a valuable reminder that buyer activity can only rise so far with mortgage rates hugging 7%,” said Bradley Saunders, an economist at Capital Economics.
Homebuilders, facing affordability challenges among buyers, have reacted in varied ways. Lennar, one of the nation’s largest builders, reported cutting prices to adapt to softening demand. Meanwhile, KB Home took the opposite approach, opting to raise prices in its latest earnings report.
Stuart Miller, co-CEO of Lennar, acknowledged the broader economic headwinds on a recent earnings call:
“The macro economy remains challenging, as mortgage interest rates have remained higher while consumer confidence has been challenged by a wide range of uncertainties, both domestic and global.”
In May, the median sale price for a new home stood at $426,600, representing a 3% increase from a year earlier.
The decline in sales has led to a noticeable increase in housing supply. At the end of May, there were 507,000 new homes available for sale, representing a 9.8-month supply at the current sales pace. This level of inventory is up 15% from May 2024, reaching the highest supply level since mid-2022, shortly after the Federal Reserve began raising interest rates in response to post-pandemic inflationary pressures. Prior to that, similar supply levels were last seen in 2009, during the housing downturn that followed the subprime mortgage crisis.
