New home sales retrench in May
|Summary
New home sales fall back as buying conditions worsen
Following a jump in April, a move up in financing costs slowed new home sales in May. New home sales tumbled 13.7% over the month to the weakest pace in seven months (623K). The South experienced a particularly notable drop-off. The trend so far this year amounts to a 3.2% year-to-date decline in transactions, reflecting mounting headwinds to new home demand. According to Mortgage News Daily, mortgage rates breached 7.0% in May, reaching the highest level since February. Mortgage rates have retreated somewhat since but remain a substantial barrier to home buying. Rising resale inventory and less-intense price appreciation for existing homes are also notable headwinds, especially as new home inventories remain at their highest point since October 2007. That said, a recent downtrend in single-family housing starts may ease the supply overhang somewhat.
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