Newly built home sales fell 16.6% in April compared to March, much more than expected, and were down 26.9% from April 2021, according to a US census.
The annual rate came in at 591,000 seasonally adjusted units. Analysts had expected 750,000. The March reading was also revised lower.
This is the slowest sales pace since April 2020, when everything was closed at the start covid pandemic. Sales rose rapidly after that, as Americans sought larger homes with outdoor spaces to quarantine.
These numbers are based on contracts signed during the month, not closings, so perhaps the most recent indicator in the housing market. Mortgage rates, which have been on the rise since January, actually rose in April. The average 30-year fixed loan rate started the month at 4.88% and finished at 5.41%, according to daily mortgage news.
Consumers have been suffering from high interest rates and high inflation for four decades. This makes it difficult for them to bear today’s high housing prices. The median price of a new home sold in April was $450,600, up nearly 20% from the previous year.
“While new construction has garnered the support of many potential buyers over the past two years due to a severe shortage of existing homes for sale, the increasing cost of a new home is causing many people to exit the market,” said George Ratio, chief economist at Realtor.com. “The new home market reflects broader real estate trends, with rising inflation taking a larger portion of Americans’ paychecks and higher borrowing costs putting pressure on homebuyers’ budgets.”
A stark drop in demand, not overbuilding, is hitting the market. The housing stock has already begun to decline over the past few months. Sluggish sales caused the inventory of newly built homes to rise sharply to a nine-month supply. The six-month supply is generally considered to be balanced between buyer and seller.
Contractors are also beginning to notice a slight increase in cancellation rates. While those haven’t appeared in earnings releases yet, analysts who follow the builders are starting to report them.
