By Michael Sasso | Bloomberg
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. That trailed all economist estimates in a Bloomberg survey.
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.
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.
“Builders are dropping prices and offering incentives, but many buyers aren’t biting under current conditions,” Ben Ayers, a senior economist at Nationwide, said Wednesday in a note. “This could set the stage for continued soft sales activity this summer with mortgage rates likely to remain elevated over the rest of 2026.”
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.
“We have long been pessimistic about the US housing market’s prospects in 2026. The miss in May sales volumes is less concerning than the rise in inventories. Inventory bloat and sour sentiment are dovetailing to keep home prices under pressure,” said Stuart Paul, a Bloomberg economist.
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.