Sales of new single-family homes are down 11.3 percent in May to 619,000 at a seasonally adjusted annual rate after an upward revision to 698,000 in April, and are down 16.5 percent from 741,000 in the year-ago month. The consensus for May in the Econoday survey of forecasters looks for sales of 650,000. The weakness in single-family homes in May is likely attributable to elevated mortgage rates. The Freddie Mac average rate for a 30-year fixed rate mortgage hovered near 7 percent in April and May. This in turn affected the affordability of homes for some buyers.

In May, the median price of a new single-family home was basically unchanged at $417,400, down a scant 0.1 percent from $417,000 in the prior month. However, the median price is down 0.9 percent from $421,200 in May 2023. Some of this will reflect that homebuilders are responding to market demand with smaller units to capture a share of the market that more usually turns to existing units. The supply of homes available for sale is up to 9.3 months' worth in May, up from 8.1 in April and 6.9 in May 2023. This is the highest since 9.7 months in December 2022. Homebuilders are likely to respond by cutting back on new construction projects until current inventories are lower.

Ongoing high prices combined with a near-term peak in mortgage rates come at a time when there is a little more housing stock coming on the market from existing units. As a result, fewer homebuyers are taking out contracts on units not yet started which accounted for 12 percent of the total sold in May, the smallest share since 13 percent in December 2022. For homes under construction, the share is up to 41 percent in May after 37 percent in April. This suggests that home shoppers who can't find an existing unit are more willing to buy new construction but are in less of a hurry than in the period when rates were lower. Sales of completed homes account for 47 percent of the total.

Elevated mortgage rates and high home prices began to show their effects in April as new home sales dropped to a 634,000 annualized pace from a sharply downward revised 665,000 in March. May's consensus is a rise back to 650,000.

New home sales measure the number of newly constructed homes with a committed sale during the month. The level of new home sales indicates housing market trends and, in turn, economic momentum and consumer purchases of furniture and appliances.

This provides a gauge of not only the demand for housing, but the economic momentum. People have to be feeling pretty comfortable and confident in their own financial position to buy a house. Furthermore, this narrow piece of data has a powerful multiplier effect through the economy, and therefore across the markets and your investments. By tracking economic data such as new home sales, investors can gain specific investment ideas as well as broad guidance for managing a portfolio. Each time the construction of a new home begins, it translates to more construction jobs, and income which will be pumped back into the economy. Once the home is sold, it generates revenues for the home builder and the realtor. It brings a myriad of consumption opportunities for the buyer. Refrigerators, washers, dryers and furniture are just a few items new home buyers might purchase. The economic"ripple effect" can be substantial especially when you think a hundred thousand new households around the country are doing this every month. Since the economic backdrop is the most pervasive influence on financial markets, new home sales have a direct bearing on stocks, bonds and commodities. In a more specific sense, trends in the new home sales data carry valuable clues for the stocks of home builders, mortgage lenders and home furnishings companies.