The combination of high home prices and elevated mortgage rates squeezed the market for new home sales in May, pushing sales below even the most pessimistic estimates.
Sales of new single-family homes fell 11.3 percent to an annual pace of 619,000, the lowest since November, data from the Census Bureau showed Wednesday.
Sales declined in all four major regions of the U.S.
The average rate of a 30-year fixed mortgage, the most popular mortgage product in the U.S., was 7.06 percent in May, the highest since November.
The average rate under President Donald Trump was 3.895 percent. Rates fell much further when the Federal Reserve slashed interest rates in reaction to the pandemic, falling all the way down to 2.65 percent in the last month of President Trump’s term.
Mortgage rates climbed rapidly after the Fed began preparing to raise interest rates to combat the rise of inflation in 2021. They peaked at 7.79 percent in October of last year.
The median price of a new home was $419,000 in May, which is 0.9 percent lower than a year ago and 0.1 percent lower than April. The decline in price reflects a surge in supply as builders have scrambled to meet demand. The supply of available homes increased to 481,000, the highest since 2008.
Despite that decline, home prices are still extremely elevated compared to the prepandemic era. The median price of a new home in February 2020, just before the pandemic struck, was $331,800. Today’s new home prices are 25 percent higher.
COMMENTS
Please let us know if you're having issues with commenting.