Sales of new homes in the US fell again in May to the lowest level since the beginning of the year, as heavy discounts could not compensate for high mortgage rates.
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Purchases of new single-family homes fell by 7.3% last month to 580,000 on an annual basis, according to government figures published on Wednesday. The average estimate of economists surveyed by Bloomberg predicted 640,000 sales.
The average sales price rose to $424,900, little changed from a year earlier. Since 2023, prices have generally fallen as builders have focused on smaller homes and lowered prices to improve affordability.
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The May sales decline marks another setback for homebuilders, who have managed to keep their purchases at respectable levels by cutting prices and offering customers subsidies to lower their mortgage payments. Mortgage rates are hovering around a nine-month high of around 6.6%, and the revival of inflation is proving to be a new challenge for potential homebuyers.
Weak demand and higher costs for lots and building materials will weigh on profits for builders throughout the year, although margins could eventually bottom out in 2026, Bloomberg Intelligence analyst Drew Reading said in a June 22 note.
In May, the supply of new homes fell by 1.4% compared to a year ago to 496,000. Still, at the current sales rate, that represented 10.3 months of supply, matching the highest level since 2009. Builders have slowed their pace of construction in an effort to reduce the oversupply of new homes on the market, including so-called “spec homes” built without a signed contract.
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The sales decline was led by the West region, which saw a decline of 26.9%, the slowest pace since October. In the South, the largest housing region, sales fell to 350,000, near the lowest level in the past seven years. Sales increased in the Midwest and Northeast.
Sales of new homes are seen as a more timely measurement than purchases of existing homes, which are calculated when contracts close. However, the data is volatile month to month. The government report found that 90% believed the change in new home sales ranged from a fall of 20.6% to an increase of 6%.