US New Home Sales Slide Sharply as Rates Weigh

The U.S. single-family home sales market experienced a larger-than-forecasted decline in May because high mortgage rates persisted to reduce market demand while inventory reached its highest point since 2007.

The Commerce Department reported that new home purchases decreased 13.7% from April to May at a seasonally adjusted annual rate of 623,000 units. The reported sales figure fell below April's revised 722,000 units and exceeded economists' predicted 693,000 units.

The sales numbers decreased by 6.3% when compared to the previous year. The new home inventory reached 507,000 units during the month which exceeded the previous total of 500,000 units and demonstrated increasing difficulties for builders.

The current high interest rates limit the purchasing power of homebuyers. The 30-year fixed mortgage rate maintained a position below 7% during May while Treasury yields remained elevated because of economic uncertainty stemming from President Donald Trump's tariff policies. The Federal Reserve has maintained its benchmark interest rate at 4.25%-4.5% after ending its rate-cutting cycle.

The tariffs have increased construction expenses particularly for lumber as well as steel and aluminum materials. The builder sentiment index reached its lowest point in two and a half years during June as companies reduced prices to clear their excess inventory. Residential investment will decline during the second quarter following its initial decrease during early 2025 according to economic forecasts.
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