New home sales buckle as supply nears four-year high

June 24, 2026

New home sales slumped 7.3% in May to a seasonally adjusted annual rate of 580,000, the second-weakest pace of the year and above only January. April sales were revised slightly higher. Sales are captured at contract signing and reflect more recent housing market activity. The declines were concentrated in the West and the South, the two largest regions by volume, with the West down nearly 27% on the month.

The median price of a newly sold home rose 2% to $424,900, with the gain reflecting more activity at the upper end. About 35% of homes sold for $500,000 or more. The average price jumped 7.8% to $540,600.

Builders' inventory continued to rise, reaching 10.3 months' supply at the current sales pace, up from 9.3 in April. This is the highest level since 2022, around the time the Federal Reserve's rate hikes were accelerating. About six months is considered a balanced market.

The increased use of sales incentives to lure buyers is supporting activity at the margin. It is compressing profit margins at a time of rising input and labor costs. Builder sentiment has sat in pessimistic territory for one of its longest stretches since the early 2010s. 

Separately, existing home sales rose 3.2% on the month and 3.2% from a year ago, reaching a seasonally adjusted annual rate of 4.17 million, the highest level since December. These sales reflect activity from a few months prior and are not fully capturing the rise in mortgage rates between March and May. Inventory climbed 3.3% to 1.55 million units, though that held the months' supply flat at 4.5. The median sales price rose to $429,300, a record for the month of May. The traditionally busy spring buying season has underdelivered; that will show up in coming data.

Mortgage rates hit their latest peak for the year in late May and have inched down only slightly since news of a potential ceasefire in the Middle East conflict. The 30-year fixed mortgage averaged 6.47% in the latest Freddie Mac reading, down from 6.52% the prior week. The 10-year Treasury yield, which the 30-year fixed follows closely, has stayed higher than it was before the conflict on renewed inflation fears and an uncertain Fed path. We expect to see two hikes in interest rates by year-end.