Sales of newly built, single-family homes in May fell 11.3% to a 619,000 seasonally adjusted annual rate from a sharp upwardly revised reading in April, according to newly released 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 pace since November 2023.
Key takeaways
- Incentives aren't enough to overcome affordability challenges. "Homebuilders had been enticing buyers with rate buydowns and other concessions, but for some homebuyers, those financial incentives are no longer enough to get them on the building lot," says Bright MLS Chief Economist Lisa Sturtevant.
- First-time buyers feeling the affordability crunch. Only 29% of first-time homebuyers could afford homes for sale nationally in the first quarter, down from 34% a year ago, according to First American's outlook report.
- Rising inventory isn't pushing new home prices down. "Even though new home prices have declined modestly, that's not necessarily because builders are cutting prices, but because builders are constructing smaller homes," says NAHB Chief Economist Robert Dietz.
New single-family home inventory in May remained elevated at a level of 481,000, up 12.9% compared to a year earlier. This represents an 9.3 months’ supply at the current building pace, which has been supported by the ongoing shortage of resale homes. The all-time high for new home supply was 12.2 months in January 2009.
Due to declines in new home size and some builder 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 6.0% in the Northeast, 25.2% in the Midwest and 6.3% in the West. New home sales are down 7.6% in the South.
NAHB's take on the data
When existing homes are added into the mix, the supply remains a lean 4.4 months, according to the National Association of Home Builders.
"Persistently high mortgage rates in May kept many prospective buyers on the sidelines," says NAHB Chairman Carl Harris. "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," says NAHB Chief Economist Robert Dietz.
