Kryptonite for Construction: New Home Sales Take a Nosedive!

Faster Than a Falling House!

Greetings citizens of Earth! It's your friendly neighborhood Superman reporting on a development that's causing more tremors than one of my landings – new single family home sales have taken a serious nosedive. According to the U.S. Census sales dropped a whopping 13.7% in May compared to April clocking in at 623,000 units on a seasonally adjusted annualized basis. Even I with my X ray vision couldn't see that coming! That's also 6.3% lower than May of last year. Seems like even the Man of Steel can't lift this market out of its slump although I could probably lift a whole house if you'd like me to.

Wall Street's 'Fortress of Solitude' Turns Out to Be Wrong!

Now you might be thinking 'Superman surely those brilliant Wall Street analysts saw this coming!' Well even the smartest minds can get fooled folks. They were expecting 695,000 sales according to Dow Jones estimates. Someone needs to recalibrate their Fortress of Solitude's forecasting system! This count is based on signed contracts so people were out shopping in May when mortgage rates remained stubbornly high.

Mortgage Rates: Higher Than My Jump Over a Skyscraper!

Speaking of high mortgage rates are playing the villain in this story. The average rate on a 30 year fixed mortgage started May at 6.83% flirted with 7% and then settled back at 6.95%. Even I get dizzy flying around those numbers! As Bradley Saunders of Capital Economics put it buyer activity can only rise so far with mortgage rates hugging 7%. It's like trying to fly through a kryptonite storm not fun.

Builders Feel the Heat (Vision)!

Our friends in the home building business are feeling the squeeze too. Lennar's co CEO Stuart Miller mentioned that high rates and a lack of consumer confidence are diminishing demand. He even said 'actionable demand has been diminished by both affordability and consumer confidence and therefore has continued to soften.' Lennar has even started lowering prices. But KB Home decided to raise their prices which is like fighting Doomsday without a plan!

Pricey Pads!

Nationally the median price of a new home sold in May was $426,600 according to the Census report 3% above the year earlier price. So the price of houses are still up. As I always say 'There is a right and a wrong in the universe and the distinction is not hard to make'. Is this the right price? I'm not too sure!

Supply: Enough Homes to Stretch From Metropolis to Krypton!

The slower sales have led to a massive increase in supply. There were 507,000 new homes for sale at the end of May representing a 9.8 month supply at the current sales rate 15% higher than May 2024. That's the highest it's been since the summer of 2022 and before that not since the subprime mortgage crisis! It seems we have enough homes to stretch from Metropolis to what's left of Krypton! But seriously folks let's hope this market finds its way back to solid ground soon. Until then keep looking up! And maybe consider renovating that old apartment building instead.