As consumers and builders continue to struggle with difficult affordability conditions, high mortgage rates, growing inflation, and economic uncertainty kept many buyers out of the market in May. According to recently released data from the U.S. Census Bureau and the U.S. Department of Housing and Urban Development (HUD), sales of newly constructed single-family houses decreased 7.3% in May to a seasonally adjusted annual rate of 580,000. Compared to a year ago, the rate of new home sales has decreased by 6.8%.
“The decline in builder sentiment is consistent with our latest builder surveys,” said Bill Owens, Chairman of the National Association of Home Builders (NAHB) and a home builder and remodeler from Worthington, Ohio. “Many potential buyers remain on the sidelines as elevated mortgage rates, higher construction costs and limited purchasing power continue to reduce the pool of qualified buyers.”
When a sales contract is signed or a deposit is accepted, a new home is sold. The house may be in any stage of construction, including unfinished, ongoing, or finished. The May reading of 580,000 units represents the number of homes that would sell if this pace persisted over the following 12 months, after accounting for seasonal factors.
There were 496,000 new single-family homes available in May, a 1.4% decrease from the same month last year. At the current rate of construction, this amounts to an increased supply of 10.3 months. In May, there were 115,000 completed, ready-to-occupy homes in the inventory, which is the same as it was a year ago.
“While builders are employing incentives and pricing adjustments to support sales activity, many households remain priced out of the market,” said Danushka Nanayakkara-Skillington, NAHB’s AVP for forecasting and analysis. “A sustained reduction in financing costs would help improve housing affordability and strengthen housing demand. The trajectory of mortgage rates and improvements in housing affordability will be key factors determining whether demand stabilizes in upcoming months.”
The typical price of a new house sold was $424,900, which was nearly unchanged from a year ago and up 2.0% from April. New home sales have increased 4.2% in the Midwest and 1.9% in the Northeast thus far this year. In the West, new house sales are down 11.4%, while in the South, they are down an estimated 8.2%.
