New home sales slowed in May as mortgage rates climbed to their highest monthly average since November 2023.
There was a time, not that long ago, that homeownership, and the benefits that come with it, was considered a cornerstone of the American dream. But lately, prospective buyers are finding their dreams being deferred by forces beyond their control.
According to a report released in late June 2024 by the National Association of Home Builders (NAHB), sales of new single-family homes dropped to 11.3% in May as interest rates rose to an average of 7.06%, the highest monthly average seen since November 2023. Data from the Department of Housing and Urban Development (HUD) and the Census Bureau shows the pace of new home sales down 16.5%.
“Persistently high mortgage rates in May kept many prospective buyers on the sidelines; however, significant unmet demand exists, and we expect mortgage rates to moderate in the coming months,” said Carl Harris, NAHB chairman, in the June report.
But current information is a mixed bag. While the inventory is there, it’s lean. The supply of single-family homes was up 12.9% at the end of the first quarter of 2024, a bit more than a 9-month supply at the current building pace. However, fewer houses are being sold, a contributing factor to the median price for a new single-family home in May reaching a record $419,300.
As predicted mortgage rates have lowered. A Prime Mortgage Market Survey conducted by Loan Mortgage Corp Freddie Mac, released in July, lists the average rate on a 30-year fixed-rate mortgage at 6.89%, but this is still twice as high as prepandemic rates.
Prevailing conditions are creating opportunities for builders to capitalize on, but new home constructions appear to be slowing, so prospective buyers may still find themselves waiting on their dreams to materialize.
