New home sales cratered in May, with the U.S. housing market leaving buyers frustrated.
Sales dropped 7.3 percent from April, according to a monthly market report from the Department of Housing and Urban Development, signaling a broader negative sentiment across the economy as consumers grapple with mortgage rates above 6 percent and inflation that hit a three-year high in May.
“Consumers have not stopped spending, but they have become increasingly selective about when and how they spend,” said Thomas J. Thompson, chief economist at performance media agency Havas Edge, in a LinkedIn post Thursday.
“Buyers are still willing to make one of the largest financial commitments of their lives, but only when affordability, financing, and value align.”
The median price of a new home rose 2 percent from April to May to $424,900, giving home buyers little relief. Interest rates hit 6.49 percent Thursday, up 5 percent since January.
Looking ahead through 2027, buying a home may not get easier. 30-year fixed-mortgage rates are expected to stay near 6 percent for the next 18 months, maintaining an average of 6.3 percent through 2027, according to federal mortgage buyer Fannie Mae.
If the projection holds, the interest rate will be above or near 6 percent for the fifth straight year, a streak that the economy hasn’t seen since the 2008 housing market collapse, according to federal mortgage buyer Freddie Mac.
Congress is looking for ways to help lower the cost of homeownership. Lawmakers passed a bill Tuesday that includes 50 provisions meant to make housing more affordable for consumers, such as banning Wall Street investors from buying single-family homes and cutting certain regulations that make home building more expensive.
However, President Donald Trump chose not to sign the bill Wednesday until Congress passed his “SAVE America Act,” which includes regulations for voter identification laws and transgender rights.
In the meantime, Americans are giving up on the dream of homeownership. Rising home prices and mortgage rates over the past five years have made owning a home in many cities out of reach for younger generations, according to a study published Wednesday from Pew Research Center.
Some 60 percent of the country’s 160 metro areas were deemed unaffordable for homebuyers, the study found. With these obstacles in front of them, 89 percent of adults under 40 say it’s harder to buy a home today than it was for their parents’ generation.
