New home sales ran at a slower-than-expected pace in the US last month, disappointing government data released on Wednesday showed.
The 623,000 annual pace undershot consensus by a mile and counted as the slowest since October.
You’ll politely recall that sales rose smartly in April, but that’s ancient history with Wednesday’s release. The near 14% MoM drop was the most pronounced since June of 2022.
As the figure reminds you, this series is so volatile as to be mostly useless but, hey: It’s an excuse for me to editorialize. I’m not complaining.
Taken at face value, the lackluster result’s just another piece of evidence to attest that the spring buying season was a bust. The latest read on builder sentiment showed that nearly four in 10 builders cut prices in May, the most in at least three years. Even that wasn’t enough to bolster sales, apparently.
Inventory continues to pile up. Months’ supply now stands at 9.8 on the new construction side. That’s the highest for any month since 2008 with just a couple of exceptions: July of 2022 and September of 2022.
The figure above tells the story: The “completed homes for sale” series from the release now sits at its highest level since June of 2009.
The problem’s affordability. The median new home will cost you a fully-loaded Continental GT, and the average new home will run you a Black Badge Cullinan. In May, the mean new home price was $522,200, the highest since March of 2024 and the seventh highest ever.
Sales in the South dropped more than 21% in May. That series, like most of the datasets from this release, is so volatile that there’s scarcely any point charting it, but last month’s decline in the nation’s largest market for new construction counted among the most pronounced on record in figures back to 1973.
Data out earlier this week showed the YoY price gain for the Case-Shiller 20-city gauge was just 3.4% in April (that series is reported on a two-month lag).
As the figure shows, that was the slowest annual rate of price appreciation for the marquee measure of overall US home prices since August of 2023, and it’s below the rate observed from 2012 to 2019.
“Monthly payment burdens near generational highs [are] effectively pricing out significant segments of potential buyers,” S&P Dow Jones’s Nicholas Godec said, describing market dynamics as “challenging but not dire.”
I suppose that depends on your definition of “dire.” Inventories may still be constrained on the resale side, but the supply picture has improved for existing homes. And that improvement hasn’t resulted in meaningful price relief, nor a pickup in sales. As discussed here on Tuesday, we’re witnessing gridlock, and there’s no mystery as to why: The persistence of near seven-handle mortgage rates puts all of the onus on price breaks.
Wednesday’s MBA update showed the average 30-year fixed was 6.88% over the last week. “Applications increased slightly overall driven by FHA refinances, but conventional applications saw declines,” Joel Kan, MBA’s Vice President and Deputy Chief Economist remarked. Purchase apps fell versus the prior week both on a seasonally-adjusted and unadjusted basis.
H-Man, a rather simple solution – lower the price of the homes via no buyer interest or inability to own at the current level. Probably a lot of home buyers in the $200K to $300K range but that means the current inventory has to be written way down. There were buyers in 2009 that did exactly that and the number of homeowner’s today who are old, may not see the equity they think is there since they have to cash out.
We’ve been watching the housing market freeze over for some years it seems.
To GFC veterans, a sputtering housing market is an alarming thing. So much of the economy revolves around housing – it’s purchase, financing, furnishing, remodeling, leveraging, sale, etc. I mean, houses are the biggest asset class in the US (I think that’s right?) So cue the bears.
Yet to date, nothing much bad has resulted, unless one is (used to be) a real estate agent or mortgage banker.
Or a frozen-out first-time homebuyer, but as we’ve reminded ourselves in another thread, there is badness, and there is badness that hurts markets.
(Anyway, don’t they stereotypically just go have more “experiences” with avocado toast in their carefree renter lifestyles?)
I think the parade of horribles doesn’t start goose-stepping until and unless House Prices Fall Significantly.
I also think we are on the cusp of seeing that start. Ref inventory, affordability, aging, rates, and the increasing percent of metros rolling over on price. I’ve been positive on house prices for years; no longer. I also think we’ll find the housing cycle’s impact on the economy did not somehow go away.
A couple hundred bp decline in 10Y rates could, probably would, push out the housing bear market. An ill-conceived privatization of FNM/FRE could pull it in.
Hi John,
This calumny cannot stand!
My carefree renter lifestyle eschews avocado toast in all its varieties. Such trifles are beneath all but the lowest echelon of carefree renter. Tonight, for instance, I was engaged in determining if the ice sheen on my shaken martini could be preserved in the freezer whilst its cloudiness resolved as I skewered three blue cheese olives. The crystal clear martini with little icebergs floating across it that resulted can only be accounted a success.
As Marlin Perkins fervently wished Jim success in the swamp, so I raise my martini to the prospects of your house projects this summer.