Sales of new homes in the US fell again in May to the lowest level since the start of the year as heavy discounts failed to offset high mortgage rates.
Purchases of new single-family homes decreased by 7.3% to an annual rate of 580,000 last month, according to government figures published Wednesday. The median estimate of economists surveyed by Bloomberg predicted 640,000 sales.
The median sales price edged higher to $424,900, little changed from a year earlier. Prices have generally softened since 2023 as builders have focused on smaller homes and cut prices to improve affordability.
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May's decline in sales marks another setback for homebuilders, which have managed to keep purchases at respectable levels by cutting prices and offering customers subsidies to reduce their mortgage payments. Mortgage rates are hovering near nine-month highs at about 6.6%, and inflation's resurgence is proving to be another challenge for would-be homebuyers.
Weak demand and higher costs for lots and building materials will depress profits for builders throughout the year, though margins may finally bottom out in 2026, Bloomberg Intelligence analyst Drew Reading said in a June 22 note.
In May, the for-sale supply of new homes fell 1.4% from a year ago to 496,000. Even so, that represented 10.3 months of supply at the current sales rate, matching the highest level since 2009. Contractors have slowed their pace of construction in an attempt to reduce an oversupply of new homes on the market, including of so-called "spec homes" built without a signed contract.
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The decline in sales was led by the West region, which saw a 26.9% drop to the slowest pace since October. In the South, the biggest homebuilding region, sales fell to 350,000, near the lowest levels of the last seven years. Sales climbed in the Midwest and Northeast.
New-home sales are seen as a more timely measurement than purchases of existing homes, which are calculated when contracts close. However, the data are volatile on a monthly basis. The government report showed 90% confidence that the change in new-home sales ranged from a 20.6% decline to a 6% gain.
