Sales of new homes fell to a five-month low in May, adding to signs of weakness in the sector despite lower mortgage rates.
Single-family home sales dropped 7.8% to a 626,000 annualized pace that missed all estimates in Bloomberg’s survey of economists, from an upwardly revised 679,000 rate in April, government data showed Tuesday. The median sales price decreased 2.7% from a year earlier to $308,000.
The weaker report suggests growing headwinds in the housing sector despite lower mortgage rates and elevated consumer sentiment. Affordability remains a problem for prospective buyers, despite a faster pace of wage gains.
The data add to housing indicators showing a mixed outlook in recent months. The S&P CoreLogic Case-Shiller index showed home-price gains in 20 U.S. cities decelerated in April for a 13th straight month to the weakest pace since 2012. Elsewhere, existing home sales gained in May as homebuilder sentiment deteriorated in June.
The number of properties sold for which construction hadn’t yet started eased slightly to 195,000, indicating potential buyers still have ample supply in the pipeline. The number of new homes for sale at the end of the month was little changed at 333,000.
The supply of homes at the current sales rate increased to 6.4 months from 5.9 months in April.
Purchases of new homes fell in the Northeast and the West, where they dropped the most since 2010. Sales rose in the South and Midwest.
Economists in Bloomberg’s survey had projected a gain to 684,000.
New-home purchases account for about 10% of the market and are calculated when contracts are signed. They are considered a timelier barometer than purchases of previously-owned homes, which are calculated when contracts close.
The report, published jointly by the Census Bureau and Department of Housing and Urban Development, tends to be volatile: it showed 90% confidence that the change in sales ranged from a 22.5% drop to a 6.9% gain.