The number of new home sales fell during May, according to the latest data from the Census Bureau and Department of Housing and Urban Development.
Overall, new single-family home sales fell 7.3% from April and 6.8% year over year. Additionally, median sales prices came in at $424,900, up 2% from April and unchanged year over year.
Maor Greenberg, co-founder and CEO of Spacial, an AI-powered structural engineering platform for residential construction and a 19-year veteran of the construction and real estate industries, said that the report “confirms the trend” that sales are soft and while the main inventory numbers appear high, the pipeline of new supply is thin. “Supply will stay tight past this year,” he said.
Here are some additional comments about the data:
- Low-price housing is the real story: “The cheaper houses stopped showing up in the data. A year ago, one in five new homes sold for under $300,000. Now, it’s one in seven. The affordable new home is getting harder to build and harder to find and that’s the real story. Homes under $300,000 accounted for 19% of sales a year ago and 15% now.”
- Putting prices in perspective: “The median price is $424,900, flat from a year ago, but the average price is $540,600, up 5%. When the average rises, but the median doesn’t, that’s not the same house getting more expensive—it’s a change in which houses are being sold.”
- Inventory concerns: “Inventory rose to 496,000 and finished homes have taken longer to sell every month this year, from three months in January to nearly four months in May. That confirms the April data, which showed the pipeline thinning. Homebuilders’ committed-to homes are stacking up, while finished spec-homes are sitting on the market with fewer ground breaks behind them.”
- Deeper into the numbers: “Higher inventory normally means oversupply, but look at what’s inside the 496,000. Only 118,000 are finished homes. The rest are not started or are under construction. This isn’t a flood of empty move-in-ready houses; it’s a backlog of homes that builders have already committed to, stacking up against a slower buyer pool.”
- Fewer affordable homes: “Builders can’t make money on entry-level homes at today’s costs, so they build pricier ones. A firm price protects its profit margins, but it’s a narrowing business that’s surviving by serving fewer, wealthier buyers and walking away from building entry-level homes. For the buyer, the price isn’t high because homes have gotten better or because demand surged. The rung those buyers were reaching for has quietly disappeared.”
By Maor Greenberg, co-founder/CEO, Spacial
