Sales of new single-family homes dropped 13.7% in May compared with April to 623,000 units on a seasonally adjusted, annualized basis, according to the U.S. Census.

That sales total was 6.3% lower than May 2024 and well below both the six-month average of 671,000 and the one-year average of 676,000. It also lags the pre-pandemic average in 2019 of 685,000 units sold.

Wall Street analysts were expecting May new home sales of 695,000, according to estimates from Dow Jones.

This count is based on signed contracts, so people out shopping in May, when mortgage rates remained stubbornly high.

The average rate on the 30-year fixed mortgage started May at 6.83%, rose steadily to just over 7% and then settled back at 6.95% by the end of the month, according to Mortgage News Daily.

“The large fall in new home sales in May cancels out all of the positivity of the past couple of months and serves as a valuable reminder that buyer activity can only rise so far with mortgage rates hugging 7%,” wrote Bradley Saunders, an economist at Capital Economics.

Homebuilders who reported quarterly earnings recently noted high rates cutting into affordability.

“The macro economy remains challenging, as mortgage interest rates have remained higher while consumer confidence has been challenged by a wide range of uncertainties, both domestic and global,” said Stuart Miller, co-CEO of Lennar, on a call with analysts following the company’s fiscal second-quarter earnings release. “Across the housing landscape, actionable demand has been diminished by both affordability and consumer confidence, and therefore has continued to soften.”

Lennar reported lowering prices, but KB Home, which posted its quarterly earnings this week, raised prices.

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.

Slower sales resulted in a significant bump higher in supply. There were 507,000 new homes for sales at the end of May. This represents a 9.8-month supply at the current sales rate, which is 15% higher than May 2024.

The last time supply was that high was briefly in the summer of 2022, after the Federal Reserve first started raising interest rates post-pandemic. Before that, supply hadn’t been this high since 2009, amid the subprime mortgage crisis and the Great Recession.