Homebuyers pulled away from the builders in May, even as affordability improved thanks to lower mortgage rates.
Sales of newly built homes fell 7.8% month-to-month and were 3.7% lower compared with May 2018, according to the U.S. Census. This number represents signed contracts, not closings, so it is a very recent indicator of buyers out shopping during the month.
The decline in sales came even as home shoppers were watching mortgage rates fall. The average rate on the popular 30-year fixed mortgage started May at 4.29%, according to Mortgage News Daily, and then ended the month at 3.94%, a sizable savings on a monthly payment, especially given higher home prices.
“The lower mortgage rates haven’t unleashed a new wave of demand,” said Buck Horne, homebuilding analyst and senior vice-president at Raymond James.
Horne pointed to rising competition from the increasing supply of existing homes for sale, especially in the markets where builders are most active. Supply of existing homes for sale is up a striking 85% in Las Vegas annually, up 52% in Seattle, and up 21% in Dallas, according to Horne. Supply in Southern California is also up in double-digits.
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