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Sales of new single-family homes fell to a seasonally adjusted annual rate of 623,000 in May, the US Census Bureau and Department of Housing and Urban Development said on Wednesday, June 25. That's down 13.7% from April and 6.3% from May 2024.
The total also fell far below Wall Street's expectations. The Dow Jones had forecasted 695,000 sales for May, CNBC reported. The actual figure was not only under the six-month average of 671,000, but also well behind the pre-pandemic 2019 average of 685,000 units sold.
"The large fall in new home sales in May cancels out all of the positivity of the past couple of months and serves as a valuable reminder that buyer activity can only rise so far with mortgage rates hugging 7%," wrote Bradley Saunders of Capital Economics.
At the same time, new-home inventory climbed to 507,000, up 1.4% from April and 8.1% above May 2024. That's the highest level of supply since the summer of 2022, when the Federal Reserve first began raising interest rates to curb inflation due to the COVID-19 pandemic.
Before that, the market hadn't seen this much new-home inventory since 2009 during the housing crash and global financial crisis. At the current sales pace, it would take 9.8 months to sell through all available inventory, up from 8.3 months in April.
Builders say prospective homebuyers are staying away from the real estate market because of high mortgage rates and increasing construction costs fueled by Trump's tariffs.
"Rising inventory levels and prospective home buyers who are on hold waiting for affordability conditions to improve are resulting in weakening price growth in most markets and generating price declines for resales in a growing number of markets," said Robert Dietz, chief economist for the National Association of Home Builders. "Given current market conditions, NAHB is forecasting a decline in single-family starts for 2025."
Trump's decision to double tariffs on imported steel and aluminum to 50% has driven up the cost of key building materials. The increase has forced developers to raise prices or delay projects.
As the market softens, more builders are offering discounts. In June, 37% of builders reported cutting prices, the highest share since NAHB began monthly tracking in 2022.
The median price of a new home rose to $426,600 in May, up 3.7% from April and 3.0% from May 2024.
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