Market for newly built homes slows as elevated mortgage rates put off many home shoppers

FILE - A residential development under construction in Eagleville, Pa., on April 28, 2023. Homebuyers should get used to painfully high mortgage rates, despite a signal from the Federal Reserve Wednesday May 4, that it could finally pause its yearlong campaign of rate hikes. After showing signs of strengthening early this year, sales of new U.S. homes fell in April and May from a year earlier by 7.7% and 16.5%, respectively.

The recent slowdown in new home sales marks a shift from last year, when sales rose nationally for the first time in two years, climbing 4.2% from a year earlier. By comparison, sales of previously occupied U.S. homes sank roughly 19% to a nearly 30-year low. "But for some homebuyers, those financial incentives are no longer enough to get them on the building lot," said Lisa Sturtevant, chief economist at Bright MLS.

For one, there are more new homes available. The available inventory at the end of last month amounted to a 9.3-month supply, going by the current sales pace. That's the highest months' supply of new homes for sale since October 2022.

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