Washington, D.C.—Elevated mortgage rates, rising inflation and economic uncertainty kept many buyers out of the new home market in May, according to the National Association of Home Builders (NAHB). Consumers and builders also continued to face challenging affordability conditions.
Sales of newly built single-family homes fell 7.3% in May to a seasonally adjusted annual rate of 580,000. The U.S. Department of Housing and Urban Development and the U.S. Census Bureau released the latest data.
The pace of new home sales declined 6.8% from a year earlier.
“The decline in builder sentiment is consistent with our latest builder surveys,” said Bill Owens, chairman of the 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.”
New single-family home inventory reached 496,000 units in May. That marked a 1.4% decline from a year earlier.
“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 assistant vice president 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.”
A new home sale occurs when a buyer signs a sales contract or submits a deposit. The home may be not yet started, under construction or completed.
The annual rate of 580,000 represents the number of homes that would sell over 12 months if the May pace continued. The figure also accounts for seasonal effects.
Inventory represented a 10.3-month supply at the current sales pace. The market also had 115,000 completed homes ready for occupancy, unchanged from a year ago.
The median new home sale price reached $424,900. That marked a 2% increase from April but little change from a year earlier.
On a year-to-date basis, new home sales increased 1.9% in the Northeast and 4.2% in the Midwest. Sales declined 8.2% in the South and 11.4% in the West.