As mortgage rates remained elevated, tipping over the 7% mark last month, sales of new homes fell significantly in May, down 11.3% below the revised April rate of 698,000 and 16.5% below the same activity a year ago, according to the latest data released Wednesday by the U.S. Department of Housing and Urban Development and the U.S. Census Bureau.
This marks the second straight month of new home sale declines, albeit last month’s dip was less steep at 4.7%. According to the data, the median sales price of new houses sold in May 2024 was $417,400; the average sales price was $520,000, and the seasonally adjusted estimate of new houses for sale at the end of May was 481,000. This represents a supply of 9.3 months at the current sales rate, the release stated.
Overall, the challenge of the day continues to be in housing affordability, experts say.
“Mortgage rates near 7% and record high home prices in many markets have created affordability challenges for many would-be buyers,” said Bright MLS Chief Economist Dr. Lisa Sturtevant in a statement. “Homebuilders had been enticing buyers with rate buydowns and other concessions, but for some homebuyers, those financial incentives are no longer enough to get them on the building lot.”
“Persistently high mortgage rates in May kept many prospective buyers on the sidelines,” said Carl Harris, chairman of the National Association of Home Builders (NAHB) and a custom home builder from Wichita, Kansas. “However, significant unmet demand exists, and we expect mortgage rates to moderate in the coming months, which will bring more buyers into the market.”
Experts pointed to some bright spots coming out of the most recent data, however.
“As sales have slowed, the inventory of new homes available for sale has hit a high not seen since January 2008,” Sturtevant added. “At the same time, the supply of existing homes available for sale has also been steadily increasing. Buyers that remain in the market are starting to have more leverage, and sellers of existing homes are increasingly offering concessions, including help with closing costs and money toward repairs. These concessions are an advantage to homebuyers who can buy an existing home at a lower price than a new home.”
“While new home inventory increased to a 9.3 months’ supply, due to a lack of resale homes for sale, the combined inventory for new and existing single-family homes remains lean at a 4.4 months’ supply according to NAHB estimates,” said NAHB Chief Economist Robert Dietz.
Still, experts caution, a robust new and existing housing supply is still out of reach.
“With more housing inventory and softening demand, expect the third quarter of 2024 to be a slower new housing market than the second half of 2023. However, while new home inventory is back at 2008 levels, other fundamentals in the market are significantly different than they were 16 years ago. The job market is strong, there is still pent-up demand among Millennials, and for all the increase in inventory, overall supply is still below pre-pandemic levels.”
