• New home sales in the US dropped sharply by 13.7% month-over-month in May, far below the expected 6.7% decline.
  • Sales fell to 623,000 units, well under the 693,000 forecast, signaling persistent challenges in the housing market.
  • High mortgage rates and economic uncertainty continue to weigh on buyer demand, despite a modest uptick in existing-home sales.

A Steeper-Than-Expected Decline

US new home sales took a significant hit in May, plunging 13.7% from April levels to just 623,000 units—marking one of the sharpest monthly drops in recent years. The figures fell well short of economist expectations, which had projected a more moderate 6.7% decline to 693,000 units.

The disappointing numbers highlight ongoing struggles in the housing sector, where elevated mortgage rates—hovering near multi-decade highs—continue to deter potential buyers. "This isn’t just a blip," said one housing analyst, speaking on condition of anonymity. "Until we see meaningful relief in borrowing costs, the new home market will remain under pressure."

Diverging Trends in Housing Data

While new home sales slumped, existing-home sales posted a modest 0.8% gain in May, according to recent data. The contrasting trends suggest buyers may be gravitating toward more affordable options in the resale market, where inventory has been gradually improving.

Builders, meanwhile, face a tricky balancing act. Housing starts held steady at 1.256 million units in May, but permits dipped slightly—a sign of caution among developers. "The pipeline isn’t drying up, but builders are clearly being selective," noted a construction industry source familiar with the matter.

What Comes Next?

With the Federal Reserve signaling only gradual rate cuts ahead, any meaningful rebound in new home sales appears unlikely in the near term. Analysts now expect 2026 sales to average around 610,000 units before potentially recovering to 680,000 in 2027—still below pre-pandemic norms.

Reached for comment, a spokesperson for the National Association of Home Builders said the group remains "cautiously optimistic" but acknowledged "headwinds persist." Attempts to obtain additional remarks from major homebuilders were unsuccessful by publication time.