Mortgage rates that averaged above 7% since mid-April, according to Freddie Mac data, contributed to a decline in new home sales last month. Sales of newly built, single-family homes in April fell 4.7% to a seasonally adjusted annual rate of 634,000 from a downwardly revised reading in March, as per data from the U.S. Department of Housing and Urban Development and the U.S. Census Bureau. This pace is down 7.7% compared to the same period last year.
“The last four weeks mortgage rates have been above 7%, and this is clearly causing many potential home buyers to sit on the fence,” said Carl Harris, chairman of the National Association of Home Builders (NAHB) and a custom home builder from Wichita, Kansas. “However, in the weeks and months ahead, we expect mortgage rates to fall below 7%. Moderating rates, along with a dearth of existing inventory, should help new home sales recover as new construction will be needed to meet the demand for homes, especially during this crucial spring/summer season.”
“A lack of homes in the resale market combined with softening of the median new home price should incentivize home buyers to turn to new construction in the coming months,” added Danushka Nanayakkara-Skillington, NAHB’s assistant vice president for forecasting and analysis.
A new home sale occurs when a sales contract is signed or a deposit is accepted. The home can be at any stage of construction: not yet started, under construction or completed. Adjusting for seasonal effects, April's reading of 634,000 units represents the number of homes that would sell if this pace continued over the next 12 months.
New single-family home inventory in April remained elevated at 480,000 units, up 12.1% compared to last year. This represents a 9.1-month supply at the current building pace due to an ongoing shortage of resale homes. Completed and ready-to-occupy inventory stood at 97,000 homes in April—up 42.6% from last year—but it remains only 20% of total inventory.
The median new home sale price in April was $433,500—a decrease of 1.4% from March but an increase of 3.9% compared to last year.
Regionally on a year-to-date basis, new home sales rose by 22.4% in the Northeast, 22.3% in the Midwest and 14.0% in the West; however, they declined by 10.5% in the South.
