New home sales in the US fell unexpectedly last month, while prices broke a new record.
Sales of new single-family homes in the United States fell last month as prices hit record highs, eager home hunters vying to become homeowners in the seller’s market.
Sales of newly constructed single-family homes declined 5.9 percent from April’s revised level, the US Commerce Department said on Wednesday, with 769,000 new homes sold.
The May drop came as a surprise and marks the second consecutive monthly decline.
But due to supply constraints due to rising raw material prices, prices of newly built homes continued to climb, with the average price of a home last month at $374,400, breaking the previous record.
“The biggest limitation on new home sales this year will be the lack of homes for sale,” Sam Hall, assistant property economist at Capital Economics, wrote in a note to clients on Wednesday. “The good news for homebuilders is that construction costs seem to be coming down, with lumber prices now down almost 50% from record highs in May.”
It’s not just new home sales that are falling while prices are rising. Current home sales declined for the fourth month in a row in May, the National Association of Realtors said Tuesday, while the average sale price of a previously owned home surpassed $350,000 for the first time.
Rising home prices are symptomatic of a wider issue for the US economy, namely how the fallout from the coronavirus pandemic has widened an already existing wealth and income gap.
House hunters who worked during the pandemic and saw their wealth rise from the rising stock market have accumulated a healthy down payment for a house. Near-zero interest rates, designed to help millions of unemployed Americans by shore up the nation’s labor market, have also led to historically low mortgage rates that aspiring homeowners are willing to lock in.
This has put sellers in the driver’s seat as eager home buyers vie for what is available. But that power imbalance has put some buyers on edge, who have been waiting for some heat to come from the country’s red-hot housing market.