Homebuilders
with
unsold
inventory
are
feeling
the
pinch
of
high

mortgage
rates
—
and
it’s
showing
up
in

new-home
sales
data.

The

U.S.
Census
Bureau’s
new-home
sales
report
for
May
shows
that
transactions
took
a
nosedive
to
a
seasonally
adjusted
annual
sales
volume
of
619,000.
Despite
May
being
part
of
the
prime
homebuying
season,
that
number
represented
a
16.5%
year-over-year
drop
and
was
11.3%
below
the
revised
rate
in
April.

Supply
has
been
steadily
increasing
and
stood
at
9.3
months
at
the
current
sales
rate
in
May.
It
was
at
8.1
months
in

April
and
6.9
months
one
year
ago.
According
to

Bright
MLS,
the
481,000
new
homes
on
the
market
is
the
most
since
January
2008,
when
homebuilders
pulled
back
on
production
before
the
financial
crisis.

This
inventory
pileup
could
start
to
affect
new-home
prices.
The
current
median
price
is
$417,400,
but
in

March
and
April,
it
was
above
$433,000,
a
roughly
3%
drop.

“However,
while
new
home
inventory
is
back
at
2008
levels,
other
fundamentals
in
the
market
are
significantly
different
than
they
were
16
years
ago,”
Bright
MLS
chief
economist
Lisa
Sturtevant
said
in
a
statement.
“The
job
market
is
strong,
there
is
still
pent-up
demand
among
Millennials,
and
for
all
the
increase
in
inventory,
overall
supply
is
still
below
pre-pandemic
levels.” 

The
new-home
sales
numbers
contrast
substantially
with
the

existing-home
sales
report
for
May
from
the

National
Association
of
Realtors
(NAR).
Sales
volume
in
that
segment
of
the
market
dropped
2.8%
compared
to
last
year
and
by
only
0.7%
month
over
month.

That’s
because
relative
to
homebuilders,
homeowners
have
more
options
for
offering
concessions,
such
as
help
with
closing
costs
and
repairs.
Mortgage
rates
that
continue
to
hover
around
7%
appear
to
be
canceling
out
builder
concessions,
according
to

First
American
deputy
chief
economist
Odeta
Kushi.

Geographically,
the
rise
in
inventory
isn’t
in
areas
with
the
most
job
opportunities,
such
as
Seattle,
Boston
or
New
York
City.

“These
areas
also
tend
to
have
households
with
higher
levels
of
home
equity
and,
therefore,
less
likely
to
sell
in
the
current
higher-for-longer
interest
rate
environment,”

CoreLogic
chief
economist
Selma
Hepp
said
in
a
statement.
“The
mixed
economy
may
drive
the
Fed
to
cut
rates,
sooner
than
later,
as
middle
and
low-income
households
continue
to
struggle.”

HousingWire
Lead
Analyst

Logan
Mohtashami
added
some
key
context
to
the
report.
The
general
trend
line
shows
steady
growth
for
new-home
sales
since
the
low
points
of
2022,
and
the
past
three
months
had
positive
upward
revisions.
In
addition,
purchase
mortgage
application
numbers
are
growing
and
the
number
of
new
homes
being
completed
are
now
above
pre-pandemic
levels.

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