According to data released by the US Department of Commerce on Wednesday, new home sales in the US declined in May due to rising housing prices and high mortgage interest rates, which discouraged potential buyers.
In terms of specific data, the annual rate of new home sales in the US was 619,000 units, the lowest since November last year. It is expected to be 633,000 units, and the value was 634,000 before April; in May, new home sales fell 11.3% month-on-month, which is expected to fall 0.2%, compared to a 4.7% drop in the previous value. New home sales have been at the lower end of the range over the past year, indicating limited sales growth in the face of insufficient buyer affordability.
In May, the median sales price of new homes fell 0.9% from the same period last year to US$417,400. Despite the year-on-year decline, it is still at a high level.
The supply of new homes for sale increased to 481,000 units in May, the highest level since 2008. This shows that while high housing prices have scared away many buyers, the continued increase in new home inventories is helping to increase affordability.
Although the new housing market accounts for only 10% of the US property market and the data fluctuates greatly from month to month, new home sales are calculated based on data at the time the contract is signed, which is different from existing home sales that are included in the statistics after the contract is signed, so it is regarded as a leading indicator of the US property market.
U.S. mortgage interest rates fell below 7% in mid-June, the first time since the end of March, but they are still more than double the level at the end of 2021.
Major builders, including Lennar Corp. and KB Home, are trying to meet buyers' affordability challenges by lowering customer mortgage interest rates or providing price concessions. So far, this strategy has kept builders' orders sufficient. Both companies have recently reported profit growth.
Lennar Chairman Stuart Miller said during last week's earnings call that in the long run, the US still faces a shortage of new homes, and pointed out that supply has been insufficient for more than 10 years. Meanwhile, the supply of second-hand housing is still far below pre-COVID-19 levels, and high borrowing costs prevent second-hand property sellers from listing and selling properties.
Recent data shows that overall housing demand is improving this month. The American Mortgage Bankers Association (MBA) home purchase application index rose to its highest level in the past three weeks since the beginning of February.
According to the existing home sales data released last week, which accounts for about 90% of sales in the US real estate market, existing home sales in the US hovered near a 30-year low and fell slightly from April. At the same time, housing prices reached a new high. Existing housing inventories surged in May, continuing the previous upward trend, but still below long-term levels.