While housing affordability has been getting a hand from lower mortgage rates, it wasn’t enough to lift new-home sales last month.
Sales of newly built single-family homes underperformed in what is traditionally the busiest time of year in the housing sector. New-home sales dropped 7.8% to a seasonally adjusted annual rate of 626,000 units in May, the U.S. Commerce Department reported Tuesday. The number represents signed contracts, not closings.
“The lower mortgage rates haven’t unleashed a new wave of demand,” Buck Horne, homebuilding analyst and senior vice president at Raymond James, told CNBC. “It’s harder for the builders to compete against resale inventory that is priced significantly below where their asking price is now.”
The median price of a newly built home sold in May was $308,000, down 2.7% from a year ago. The median price for an existing-home was $277,700 in May, the National Association of REALTORS® reported.
However, there was a silver lining for the new-home sector: New-home sales are still up 4% over a year ago.
Also, “the report shows growth in sales in the $200,000 to $300,000 price range, which indicates middle-class demand for housing is being supported by low rates and solid employment,” says Greg Ugalde, chairman of the National Association of Home Builders.
New-home sales were higher in the South and West last month. In the South, new-home sales moved 7.5% higher month over month and 3.4% higher in the West. On the other hand, new-home sales were down last month by 13.3% in the Northeast and by 3.2% in the Midwest.
Overall, the “May numbers are a big surprising given lower mortgage interest rates and solid builder confidence data,” says Robert Dietz, NAHB’s chief economist. “Based on these conditions, we expect June new home sales figures will show a rebound.”
The inventory of new homes stood at 333,000 in May, which represents a 6.4-month supply.