New home sales disappoint

May 28, 2026

New home sales fell 6.2% in April after March was revised lower, with losses across every region except the West. Sales activity is increasingly concentrated at the higher end of the market; homes priced above $500,000 made up a third of all sales, a larger share than in the prior month. Prospective buyers are contending with higher house prices, higher mortgage rates and shrinking purchasing power, all at the same time. Affluent buyers able to afford those increases are dominating the market.

Mortgage rates dipped briefly in April before reversing as the Iran war kept upward pressure on long-term yields. Purchase applications and refinancing activity both diminished. Affordability was already stretched going into the annual buying season. April inflation data came in at the hottest pace since May 2023 while the saving rate fell to 2.6%, the lowest since just before the financial crisis in 2008. Real disposable income declined for the third consecutive month.

Builders are caught in the same bind. Input costs are still rising, tariffs are sticky and the energy shock has not fully worked through the supply chain. More than 60% of builders offered sales incentives this month, a year-long trend. Margins are under pressure across the industry with smaller builders feeling the most pain.

The median new home price rose 8% in April to $422,500, driven largely by the shift toward higher-priced homes rather than broad price appreciation. Estimated months of supply climbed to 9.4 from 8.7, well above the 6-month threshold that signals a balanced market. Inventory is rising not because builders are producing more houses but because demand at the lower and middle price points is constrained.

Existing home sales, which are recorded at the contract closing and reflect activity from months earlier, edged up 0.2% in April to an annualized pace of 4.02 million. The median existing home price was $417,700, with just 4.4 months of supply. Inventory is edging up compared to last year, but the share of homes at the entry-level price point remains low.

Inflation is running at its hottest pace in three years as real incomes are falling.

Yelena Maleyev

KPMG Senior Economist

The spring buying season has delivered another disappointment. Sales are falling; the buyers who remain are increasingly those who need financing the least. The brief dip in mortgage rates in April offered no sustained relief; rates reversed while the Iran war shows no sign of releasing its grip on long-term yields.

Inflation is running at its hottest pace in three years as real incomes are falling. The Federal Reserve, facing the hottest reading for personal consumption expenditures (PCE) inflation since before its last rate hike, could indicate another is on the table. For a housing market that has been waiting on rate relief since 2022, that is a significant setback. Residential investment will remain a drag on growth into the end of the year.