US New Home Sales Slump; Supply at More Than 16-Year High

• Sales of new U.S. single-family homes dropped to a six-month low in May as a jump in mortgage rates weighed on demand, offering more evidence that the housing market recovery was faltering.
• However, the sting from the largest decline in sales in more than 1-1/2 years, reported by the Commerce Department on Wednesday, was softened by a sharp upward revision to data for April. The revised data shows sales rising instead of falling as previously estimated. Supply was the highest in more than 16 years.
• New home sales declined 11.3% to a seasonally adjusted annual rate of 619,000 units last month, the lowest level since November, the Commerce Department's Census Bureau said. The percentage-based drop was the biggest since September 2022. The sales pace for April was revised up to 698,000 units, a nine-month high, from a previously reported 634,000 units.
• New home sales are likely to remain weak. According to a report from the Mortgage Bankers Association, week-over-week (WoW) seasonally adjusted loan applications for home purchases rose 1% last week. Sales plunged 43.8% in the Northeast and slipped 4.5% in the West last month. They plummeted by 12.0% in the densely populated South and 8.6% in the Midwest, which is viewed as a more affordable region.
• National house prices are, however, steadily rising. The Federal Housing Finance Agency reported on Tuesday that single-family home prices increased 6.3% on a year-on-year (YoY) basis in April. There were 481,000 new homes on the market at the end of May, the highest level since January 2008 and up from 474,000 units in April.
• At May's sales pace it would take 9.3 months to clear the supply of houses on the market. That was the most months since November 2022 and up from 8.1 months in April. Rising supply could improve housing affordability.

(Source: Reuters)