Against industry experts' predictions, new home sales in the U.S. increased to a thirteen-month high. New home sales gained 4.1%, reaching a seasonally adjusted annual rate of 683,000 units in April. This is the highest level since March 2022. The Commerce Department's report revised March's sales to 656,000 units from 683,000. Bloomberg's survey of economists estimated a reading of 665,000 units. The boost in new home sales can be attributed to the lack of inventory of pre-owned homes in the housing market.
The report comes on the heels of data released last week that showed housing starts increasing 2.2% MoM to reach an annualized rate of 1.4 million and the homebuilder sentiment reaching a ten-month high. In a recent report, Fannie Mae noted that demand is shifting toward the new home market because of affordability concerns, low inventory, and the lock-in effect. New home sales hit a multi-year low in mid-2022 and gradually picked up towards the end of last year. The South and Midwest led the recovery, where sales surged 18% and 12%, respectively. However, there was a minor drop in sales in the Northeast and West. Though there was an unexpected increase in new home sales, prices declined by 8.2% YoY to $420,800, the largest drop since April 2020. According to Bloomberg, the price decline indicates more purchases of cheaper homes. Based on April's sales pace, it would take 7.6 months to clear the supply of houses in the market, which currently stands at 433,000. The number of homes sold in April and waiting for construction to begin reached a one-year high of 155,000. Conrad DeQuadros, senior economic advisor at New York's Brean Capital, said, "The evidence continues to accumulate that the housing market may have largely adjusted to the higher level of mortgage rates but the decline in the median home price is consistent with the hypotheses that home builders may be tailoring the construction of new homes towards first-time home buyers."
The Housing Market Index survey by the National Association of Home Builders (NAHB) revealed the share of builders reducing home prices was 30% in April. The share has continued to decrease for the past few months. It was 31% in March and February, 35% in December, and 36% in November. The average price reduction in April was 6%. It is tough for builders to reduce home prices as material costs are still high and labor is extremely costly. |
