Sales of new U.S. single-family homes fell to a six-month low in May as rising mortgage rates sapped demand, providing further evidence that the housing market recovery is faltering.
The Commerce Department’s Census Bureau said Wednesday that new home sales last month fell 11.3 percent to a seasonally adjusted annual rate of 619,000, the lowest level since November.
The sales pace for April was revised upward to 698,000 units from the previously reported 634,000 units.
Economists polled by Reuters had expected new home sales, which account for more than 10 percent of U.S. home sales, to rise slightly to 640,000.
New home sales are counted when a contract is signed, making them a leading indicator of the housing market.
However, figures can vary from month to month. Sales in May were down 16.5% compared to a year ago.
The housing market is sluggish, with rising mortgage rates causing declines in existing home sales and home construction.
Residential investment recorded double-digit growth in the first quarter.
The average interest rate on the popular 30-year fixed mortgage hit a six-month high of 7.22% in early May, before falling to 7.03% by the end of the month, according to data from mortgage lender Freddie Mac.
In the Northeast, sales plummeted 43.8 percent, while in the West they were down 4.5 percent.
The densely populated South saw a steep 12.0% drop, while the Midwest, considered a more affordable region, saw an 8.6% drop.
The median price of a new home fell 0.9% year-over-year to $417,400 in May.
Nearly half of the new homes sold last month were priced below $399,000.
A survey last week by the National Association of Home Builders found that the percentage of home builders who cut prices in June to boost sales rose to the highest in five months.
Builders are building smaller homes to fit homebuyers’ budgets.
However, home prices across the country are rising.
The Federal Housing Finance Agency said Tuesday that single-family home prices rose 6.3% in April from a year earlier.
The Census reported that there were 481,000 new homes on the market at the end of May, up from 474,000 in April.
At May’s sales pace, it would take 9.3 months to buy through the supply of homes on the market, up from 8.1 months in April.
