Macro Flash Report

New Home Sales

Takeaway: Elevated prices and mortgage rates continue to challenge the housing market as seen through May’s New Home sales notably slowing in pace and moving to the lower end of the recent range. Looking forward, there has been a recent surge in new home inventory, which is currently at its highest level since 2008 and suggests some pressure from the ongoing affordability issues could alleviate.

New Home Sales dropped -11.3% in May to an annualized rate of 619k, the slowest pace since November 2023. This slump, attributed to high prices and mortgage rates, follows April’s significant revised higher rate of 698k from the initial 634k reading, but still far below the forecasted 640k.

• Sales fell across all major regions, with the Northeast experiencing the steepest decline at -43.8%.
• The median sales price decreased by -0.9% year-over-year to $417,400, while the average price rose to $520,000 from $495,800 in May 2023.
• Inventory levels hit their highest since 2008, with 481k new homes listed for sale, representing about 3 month of supply.

This is interesting in the context of May’s Existing Home Sales from last week, which was better than expected at 4.11m vs 4.08m, albeit lower than the April reading (4.14m). Affordability remains the primary concern in the sector with the national average for a 30yr mortgage still above the 7% level per Bankrate.com.

Additionally, May’s Building Permits were revised higher this morning from the preliminary estimate of 1386k, registering a slightly less decline of -2.8% to an annual rate of 1399k, still a fall from April’s 1440k.