New-Home Sales Tumble in May as Mortgage Rates Remain High

Sales of new-construction homes plunged in May as prices edged up and buyers recoiled from mortgage rates stuck in the mid-6% range. 

Contract signings for newly built homes fell to a seasonally adjusted annual rate of 580,000 in May, down 7.3% compared to April, the U.S. Census Bureau and Department of Housing and Urban Development reported on Wednesday. The May figure was also down 6.8% from a year ago.

This nearly matches a recent low watermark of 576,000 new home sales in January, when winter storms froze the market.

Meanwhile, new home prices rose, with May's median sales price reaching $424,900, up 2% from the previous month's $416,500, and virtually unchanged from what it was a year ago.

The latest readout comes a week after the Census Bureau report that construction starts on single-family homes fell in may alongside new permits and completions.

At the same time, the National Association of Realtors® reported that existing home sales climbed in May to their highest level since December 2025, driven by an influx of first-time homebuyers, while pending home sales increased 3.8% month over month and 4.8% year over year.

Builders are pulling back

The sluggishness of new home sales, coupled with the higher prices, signals that builders are relying on higher-dollar transactions to make up for the diminished pace of the market, according to Realtor.com® senior economist Joel Berner.

A still-strong inventory of homes for sale drove the months' supply of homes in the new construction category to 10.3, up from 9.3 in April and 9.7 last May.

"The new home market is firmly in buyer’s market territory and moving even further that way," says Berner.

Regionally, the largest sales pullback was in the West, which retreated 26.9% from a strong April and 17% year over year. Meanwhile, the Northeast (+3% month over month, +17.2% year over year) and Midwest (+16.2% month over month, -3.7% year over year) had positive performances, while the South (-4.1% month over month, -5.4% year over year) had a less-pronounced negative one.

"New homes are selling better in the Northeast and Midwest where overall housing supply is more constrained, while they are struggling more to sell in the regions where inventory has recovered to pre-pandemic levels," notes Berner.

The number of completed homes for sale held steady in May, but the number of homes under construction ticked up and the number of homes not yet started surged to its highest level in over a year.

"These disappointing new home sales figures reflect a challenging market of increased costs that make delivering affordably-priced inventory difficult, as evidenced by the share of sales under $300,000–down from last May with basically the same median price," explains Berner.

At the same time, buyer demand is being squeezed by the high cost of living and geopolitical uncertainty, and even the generous incentives builders are offering are not moving the needle on sales volume nationally.

Berner predicts that new opportunities for builders may arise following Tuesday's passage of the 21st Century ROAD To Housing Act, which promises to result in a rollback of regulatory burdens for building in parts of the country where new construction is most needed.

"Smaller-scale, more affordable urban construction could meet the market where it is," he concludes.