WASHINGTON — Rising interest rates and ongoing economic uncertainty have contributed to a significant drop in home buyers, with housing affordability remaining a key issue. According to new data from the U.S. Department of Housing and Urban Development and the U.S. Census Bureau, sales of newly built single-family homes fell by 13.7% in May, bringing the adjusted annual rate down to 623,000. This marks the slowest pace since October of the previous year, coinciding with an average mortgage rate of 6.83% for the month.
Sales in the South experienced a particularly dramatic decrease, plummeting by 21% in May. Buddy Hughes, chairman of the National Association of Home Builders (NAHB), commented on the impact of affordability challenges, stating that many buyers are being pushed out of the market despite builders’ efforts to offer incentives, including price reductions reported by 37% of builders surveyed.
Year-to-date figures further illustrate the trend, with new home sales down 3.2% in 2025. This slowdown has led to an increase in inventory, which now sits at an elevated 9.8 months’ supply, the highest level since 2015. According to NAHB Chief Economist Robert Dietz, this rise in inventory is expected to cause a decrease in housing construction starts in the near future.
The total months’ supply of new and resale single-family homes has climbed to 5.2, reflecting mounting inventory pressures on the market. In May, the inventory of new single-family homes reached 507,000, marking an increase of 1.4% from the previous month and 8.1% from a year ago. At the current sales pace, this translates into a months’ supply of 9.8, up from 8.5 last year.
The median price for new homes has also seen an increase, reaching $426,600 in May compared to $414,300 a year ago. This pricing change suggests that higher-income buyers are experiencing fewer constraints, while those in lower-income brackets face greater challenges. Additionally, new home sales priced below $500,000 were down by 15% in May 2025 compared to the same month in 2024.
Regionally, new home sales have experienced varying declines across the country, with the Northeast seeing a 20.7% decrease, the Midwest down 11.9%, and the South slightly declining by 1.8%. In contrast, the West reported a 2.1% increase in new home sales.
This situation highlights the ongoing challenges within the housing market but also suggests that as builders adapt to these conditions, there may be opportunities for innovation and responsiveness in meeting varying buyer needs.