The sale of new single-family homes in the United States fell sharply in May, marking a six-month low as higher mortgage rates dampened demand, signaling challenges for the housing market's recovery.
According to the latest data from the Commerce Department's Census Bureau, new home sales dropped by 11.3% to a seasonally adjusted annual rate of 619,000 units last month. This represents 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 surveyed by Reuters had anticipated a slight increase in new home sales to a rate of 640,000 units, underscoring the unexpected decline and its impact on the broader housing sector. New home sales account for more than 10% of total US home sales.
The housing market's recent slowdown comes amidst a resurgence in mortgage rates, which has also subdued demand for existing homes and new home construction. Residential investment, which saw robust double-digit growth in the first quarter, is now facing headwinds from these higher borrowing costs.
In early May, the average rate for a 30-year fixed mortgage reached a six-month peak of 7.22%, before moderating to 7.03% by the end of the month, according to data from Freddie Mac, a mortgage finance agency.
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