Pundits expected a slight drop in April new-home sales. NAHB’s chair calls the drop significant and cites the higher cost of new construction and rising interest rates.
WASHINGTON – New home sales posted a double-digit percentage decline in April, down 16.6%. It’s the weakest pace in two years, with the National Association of Home Builders (NAHB) citing rising mortgage rates and worsening affordability conditions for the drop.
Sales of newly built, single-family homes in April fell 16.6% to a 591,000 seasonally adjusted annual rate from a downwardly revised reading in March, according to data by the U.S. Department of Housing and Urban Development and the U.S. Census Bureau.
Year-to-year, new home sales are down 26.9%.
“The volume of signed sales contracts significantly declined in April as the cost of purchasing a home increased in 2022 as interest rates surged higher,” says Jerry Konter, chairman of the National Association of Home Builders (NAHB). “Higher construction costs fueled by rising material prices and supply-side constraints along with limited existing home inventory are pricing many potential homebuyers out of the market.”
NAHB cites another indicator of deteriorating affordability conditions, particularly for the entry-level market: A year ago, 25% of new home sales were priced below $300,000; in April that share fell to 10%.
“The April drop for new home sales is a clear recession warning,” says NAHB Chief Economist Robert Dietz. “The median price of a newly-built single-family home increased 19.7% year-over-year. While the nation needs additional housing, home sales are slackening as tightening monetary policy continues to put upward pressure on mortgage rates and supply chain disruptions raise construction costs.”
A new home sale occurs when a sales contract is signed or a deposit accepted. The home can be in any stage of construction: not yet started, under construction or completed. In addition to adjusting for seasonal effects, the April reading of 591,000 units is the number of homes that would sell if April’s pace continued for the next 12 months.
In an indication that builders will be slowing construction, new single-family home inventory jumped to a 9-months’ supply – up 40% over last year. NAHB says 444,000 new homes are available for sale, though only 38,000 of those are completed and ready to occupy.
The median sales price for a new home rose to $450,600 in April from $435,000 in March, up more than 19% compared to a year ago, primarily due to higher development costs, including materials, according to NAHB.
Regionally, on a year-to-date basis, new home sales fell in three regions, down 16.8% in the Midwest, 19.3% in the South and 0.6% in the West. New home sales rose 6.5% in the Northeast.
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