May saw the biggest decline in US new home sales in nearly three years as incentives failed to ease affordability limitations.
According to official data issued Wednesday, sales of new single-family houses fell 13.7% to a seven-month low of 623,000 annually last month. That was less than any Bloomberg survey estimate.
According to the most recent data, homebuilders are sitting on growing inventories as a result of a slower labor market, increasing material costs brought on by tariffs, and mortgage rates that are stuck around 7%. Despite providing subsidies to lower consumers’ financing costs, several builders are slowing down building as a result of the concessions’ dwindling returns.
According to Heather Long, chief economist of Navy Federal Credit Union, the real estate market is expected to have a very difficult spring and summer. Due to their concerns about uncertainty and high mortgage rates, buyers are remaining passive.
According to the home sales data, there were slightly more new homes for sale in May than there had been since 2007. At the current sales pace, that equated to 9.8 months’ worth of supply. There were 119,000 completed homes for sale, which is nearly a 16-year record.
Last month, the median sales price rose 3% from the previous year to $426,600, the first year-over-year price increase in 2025. Since mid-2023, the resale market has seen a steady annual increase in pricing due to a shortage of inventory.
The largest US homebuilding region, the South, saw a 21% decline in sales last month, the biggest in over 12 years. While contract signings increased in the Northeast, they decreased in the West and Midwest.
Although we had anticipated a reduction in sales volumes, the activity decline—particularly in the South—surpassed our projections. We expect prices to encounter challenges throughout the year, according to Bloomberg analyst and economist Stuart Paul, as inventories continue to rise and affordability remains a challenge for the median potential home-buying household.
According to data released this week, ground-breaking on single-family homes last month remained slow due to declining sales and more bloated inventories. In the upcoming quarters, analysts predict that residential investment will continue to be a weak point for the economy.
According to a recent report by Bloomberg Intelligence analyst Drew Reading, homebuilders’ confidence is at its lowest point since December 2022, and at the same time, a growing number of previously owned homes are becoming a challenge to builders.
By sustaining its construction output, builder Lennar Corp. has demonstrated a readiness to reduce home prices and take on reduced margins in order to maintain market dominance.
Compared to purchases of existing homes, which are determined when contracts close, new home sales are thought to be a more timely metric. The data are erratic, though. According to the government analysis, there was 90% confidence that the fall in new house sales would be between 26.8% and 0.6%.
