Sales of new homes tanked in May, pushing supply up to a 3-year high

Sales Performance - Sales of new single-family homes dropped 13.7% in May compared to April, totaling 623,000 units on a seasonally-adjusted, annualized basis, which is 6.3% lower than May 2024 and below both the 6-month average of 671,000 and the one-year average of 676,000 [1] - Wall Street analysts had expected May new home sales to be 695,000 according to estimates from Dow Jones [1] Mortgage Rates - The average rate on the 30-year fixed mortgage started May at 6.83%, rose to just over 7%, and settled back at 6.95% by the end of the month [2] - High mortgage rates are impacting buyer activity, limiting the potential for sales increases [3] Market Conditions - The macroeconomic environment remains challenging, with high mortgage interest rates and diminished consumer confidence affecting demand [4] - Home builders are experiencing mixed responses, with some lowering prices while others, like KB Home, are raising prices despite the overall market conditions [4] Pricing and Supply - The median price of a new home sold in May was $426,600, which is 3% higher than the previous year [5] - Slower sales have led to a significant increase in supply, with 507,000 new homes available at the end of May, representing a 9.8-month supply at the current sales rate, which is 15% higher than May 2024 [5] - This level of supply has not been seen since the summer of 2022 and has not been this high since 2009 during the subprime mortgage crisis [6]