New home sales in April were at a seasonally adjusted annual rate of 634,000, a decrease of 4.7% compared with March and down 7.7% compared with April 2023, according to estimates from the U.S. Census Bureau and the U.S. Department of Housing and Urban Development.
The median sales price of a new single-family home sold in April was $433,500. The average sales price was $505,700.
As of the end of the month there were about 480,000 new homes available for sale in the U.S.
That’s about a 9.1-month supply at the current sales rate.
Rising mortgage rates in April were the main factor attributed to the slowdown.
“The last four weeks mortgage rates have been above 7 percent and this is clearly causing many potential home buyers to sit on the fence,” says Carl Harris, chairman of the National Association of Home Builders (NAHB), in a statement. “However, in the weeks and months ahead, we expect mortgage rates to fall below 7 percent. 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,” adds Danushka Nanayakkara-Skillington, assistant vice president for forecasting and analysis for NAHB.
Odeta Kushi, deputy chief economist for First American, points out that new home sales “had been a relative bright spot in housing,” due to the fact that so many existing-homeowners are “trapped” in their current homes by their low-interest mortgages, resulting in new homes becoming the “only game in town” for many buyers.
“But a variety of factors have converged to sap its momentum,” Kushi says in a separate statement. ”The spring surge in mortgage rates has dampened demand, even amid falling new-home prices and an uptick in new-home inventory, which reached its highest point since 2008. The impact is clear in April’s new-home sales, which came in below expectations and the March data was revised downward as well.
“The reasons behind the moderation of new-home prices may be that builders continue to offer price cuts to entice buyers,” Kushi says. “The NAHB reported that in May, about 25 percent of builders said they reduced prices. The average price reduction was 6 percent.
“Builders are also adapting to the affordability crunch by building smaller homes,” Kushi adds. “According to first-quarter 2024 Census data, the median square footage of a new single-family home was the smallest since 2009.”
Photo: Alexander Andrews