Sales of new single-family homes in the U.S. fell sharply in May 2025, dropping 13.7% from April to a seasonally adjusted annualized rate of 623,000 units, according to the U.S. Census Bureau. This marks a 6.3% decline from May 2024 and places the sales figure well below the six-month average of 671,000 and the one-year average of 676,000. It also trails the pre-pandemic average of 685,000 units sold in 2019. The unexpected decline contrasts with Wall Street expectations, as analysts projected sales of 695,000 for the month.
High Mortgage Rates and Uncertainty Continue to Undermine Buyer Confidence and Housing Demand
The drop in sales is largely attributed to persistently high mortgage rates. The average rate on a 30-year fixed mortgage rose from 6.83% at the beginning of May to over 7% before settling at 6.95% by month’s end. These elevated rates have significantly impacted buyer affordability. Economist Bradley Saunders from Capital Economics noted that the downturn erases gains made in previous months, emphasizing that buyer activity is capped when mortgage rates hover around 7%.
New Home Sales Plunge in May as High Mortgage Rates Push Buyers Out of the MarketSeveral major homebuilders acknowledged the strain high interest rates have placed on the housing market. Stuart Miller, co-CEO of Lennar, described the economic environment as challenging, citing not only high mortgage rates but also weakened consumer confidence driven by a host of uncertainties. The combination has led to softened demand, with some builders like Lennar lowering prices to attract buyers, while others, such as KB Home, opted to raise prices despite the slowdown.
Rising Home Prices and Inventory Signal Ongoing Strain in Housing Market Dynamics
Despite slower sales, the national median price of a new home in May increased to $426,600, a 3% rise from the same period last year. Meanwhile, the decline in buyer activity led to a sharp increase in housing supply. At the end of May, there were 507,000 new homes available, representing a 9.8-month supply at the current sales pace—15% higher than the previous year. This level of inventory has not been seen since mid-2022 and, before that, not since 2009 during the housing crisis.
The latest data highlight the fragile balance between affordability and housing supply in the U.S. market. Persistently high mortgage rates and weakened consumer confidence, influenced by both economic and geopolitical uncertainties, continue to weigh on buyer demand.
Unless borrowing costs decline or household incomes see meaningful growth, the housing market is expected to stay under pressure. Builders are left with the difficult task of balancing the need to remain profitable while also appealing to increasingly price-sensitive buyers.
