U.S. New Home Sales Decline in April, Prices Rise Compared to Last Year

U.S. new home sales fell in April due to rising mortgage rates and higher prices, signaling a slowing housing market. Median prices increased by 3.9% year-over-year.

May 23, 2024 - 10:55
May 23, 2024 - 10:56
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U.S. New Home Sales Decline in April, Prices Rise Compared to Last Year
U.S. New Home Sales Decline in April, Prices Rise Compared to Last Year

Sales of new single-family homes in the U.S. experienced a significant drop in April, largely due to rising mortgage rates and higher prices. This trend indicates a slowdown in the housing market during the second quarter.

According to the Commerce Department's Census Bureau, new home sales fell by 4.7% to an annual rate of 634,000 units in April. March’s sales numbers were also revised downward from 693,000 units to 665,000 units.

Regional Sales and Economic Forecast

Economists surveyed by Reuters had predicted a smaller decline, expecting sales to hit 679,000 units. However, the actual figures showed a sharper drop. Sales plummeted by 20.9% in the Northeast and 7.3% in the West. In the South, sales fell by 4.8%, whereas the Midwest saw a surprising increase of 10%.

Market Trends and Mortgage Rates

New home sales, recorded at the time of contract signing, serve as an early indicator of the housing market's health but can fluctuate significantly each month. In April, sales were down 7.7% compared to the previous year. Builders have responded to higher mortgage rates by constructing smaller homes and offering incentives to buyers. This strategy helped residential investment grow at its fastest rate in over three years during the first quarter.

The average rate for a 30-year fixed-rate mortgage surpassed 7% in April, according to Freddie Mac, further dampening the housing market’s momentum. The National Association of Realtors reported a decline in existing home sales for April, and government data showed a reduction in single-family housing starts and building permits. Additionally, homebuilder confidence saw a notable decline in May.

Price and Inventory

The median price for new homes rose by 3.9% year-over-year to $433,500 in April. Most new homes sold were priced between $300,000 and $499,999. The number of new homes on the market increased to 480,000 by the end of April, up from 470,000 in March. At the current sales pace, it would take 9.1 months to sell all the available homes, compared to 8.5 months in March.

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