May 2024: New Home Sales Fell Despite Easing Mortgage Rates in May

• There were 619,000 (SAAR) new single family-home sales nationwide in May down 11.3% from the revised April rate of 698,000 and 16.5% below the May 2023 estimate, according to the U.S. Census Bureau.
• The median price of new houses sold was $417,400 down 0.9% from a year ago.
• The seasonally-adjusted estimate of new houses for sale at the end of May was 481,000, a supply of 9.3 months at the current sales rate. This is up from 8.1 months in April and up from 6.9 months in May 2023.

What happened: After an upward revision in April, newly built home sales decreased in May. The quick rise in mortgage rates this spring pulled housing demand lower leading to a rise in both resale as well as new home inventory.

Why it matters: Higher mortgage rates have loosened the housing market somewhat when compared to a year ago. Similarly to existing home sales, which fell in May, sales of newly built homes also decreased this month. Fewer homes sold and increasing new home inventory led to the highest months’ supply of new homes on the market since October 2022.

Roughly 1 in 4 builders cut prices to bolster sales in May. However, the average price reduction in May held steady at 6% according to data from the National Association of Home Builders. Meanwhile, more than half of all builders offer sales incentives. Higher inventory points to the potential for more price cuts and more incentives - like rate buydowns - to make the math work for prospective buyers.