Sales of newly built single-family homes in the United States unexpectedly declined in May as elevated mortgage rates and high property prices continued to discourage potential buyers.
U.S. New Home Sales Fall 7.3%
New home sales dropped 7.3% in May to a seasonally adjusted annual rate of 580,000 units, according to data released by the Commerce Department’s Census Bureau.
Compared with the same month last year, sales were down 6.8%.
New home sales represent a relatively small part of the wider U.S. housing market. The data can also fluctuate considerably from one month to another because sales are recorded when buyers sign contracts.
High Home Prices Limit Buyer Demand
The median price of a new home stood at $424,900 in May. This was little changed compared with the same period a year earlier.
Although prices have stabilized on an annual basis, housing affordability remains a significant challenge for many Americans.
The combination of expensive homes and elevated borrowing costs has prevented some potential buyers from entering the market.
Mortgage Rates Rise to 6.47%
Mortgage rates have increased amid higher oil prices, stronger inflation concerns and rising U.S. Treasury yields.
The average rate on a popular 30-year fixed mortgage has climbed by approximately 50 basis points since the U.S.-led conflict with Iran began at the end of February.
According to mortgage finance agency Freddie Mac, the average 30-year mortgage rate reached 6.47% last week.
Housing Affordability Remains Under Pressure
Higher mortgage rates increase monthly repayments and reduce the amount that buyers can afford to borrow.
As a result, many households may delay purchasing a property until borrowing costs or home prices decline.
Persistently high financing costs could continue to weigh on U.S. new home sales and the broader housing market in the coming months.
