New Home Sales Stumble Badly in April

By Mark Lieberman

Managing Director and Senior Economist

Highlights:

  • Pace of contracts for new home sales FELL 6.9 percent in April to a seasonally adjusted annual rate (SAAR) of 673,000;
  • The March sales pace originally reported as 692,000 was revised up to 723,000
  • The unsold inventory of new homes SLIPPED 3,000 or 0.9 percent in April to 332,000;
  • With the slower sales rate, the months’ supply of new homes for sale ROSE to 5.9 in April from 5.6 in March;
  • Median price of a new home JUMPED $27,800, or 11.9 percent, from March to $342,200, the highest since December 2017 ($343,300); Year-year the median price was up 8.8 percent, $27,800.

Trends:

  • The number of contracts for the sale of new homes fell month-month for the first time this year;
  • The year-year increase in the median price of a new home was first since last October;
  • The Census Bureau and Department of Housing and Urban Development, in a separate report last week, reported completions of single-family homes at a915,000 SAAR – 245,000 more than sales.

Data Source: Census Bureau and Department of Housing and Urban Development

Image result for new home sales

Even as home builder confidence remains at lofty levels, new home sales fell sharply in April, the traditional start of the home-buying season.

The National Association of Home Builders last week reported its Housing Market Index rose three points to 66 (out of 100) in May with “buyer traffic,” one of three components of the index, improving two points to 49.  The NAHB noted despite the sharp April decline, the April sales pace was the third highest monthly rate since the end of the Great Recession.

But the weaker sales rate came in the same months the National Association of Realtors reported sales of existing homes fell, albeit by 0.4 percent, in April, the third time in the last four months and 11th time in the last 13 months sales have declined.

While reported new home sales (contracts for sale, not closings) declined, the median price of a new home rose at the fastest rate since February 2018. Sales typically fall when the median price increases. The cost of a new home is likely to continue to rise as higher tariffs affect the price of raw materials used in home building.

Meanwhile, Freddie Mac reported its weekly survey of mortgage interest rates showed another rate drop, the fourth in as many weeks, with the average rate for a 30-year fixed rate loan edging down to 4.06 percent from 4.07 percent one week earlier, the change saving $1.74 per month on a $300,000 mortgage or $626.40 over the life of the loan, probably not enough to boost home sales.

Indeed, the basic challenges to home ownership remain: still weak earnings growth, heavy student debt burdens affecting younger potential borrowers and recollections of observing the mortgage meltdown 10 years ago.

Meanwhile, the number of residential construction jobs, according to the Bureau of Labor Statistics, was rose about 600 from March to April to 2,899,200.

Hear Mark Lieberman on P.O.T.U.S. (Sirius-XM 124) Friday at 6:20 am Eastern Time. You can follow Mark Lieberman on Twitter at @foxeconomics.

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