Sales of new single-family homes continued to fall for the fourth-straight month in April, plummeting to their lowest level since before the pandemic.
According to a joint report from the U.S. Census Bureau and Department of Housing and Urban Development (HUD), the seasonally adjusted sales rate was 591,000, representing a 16.6% drop from March sales of 709,000 and a 26.9% drop below April 2021 sales of 809,000
Key findings:
- 591,000 new homes sold in April
- The seasonally adjusted estimate of new houses for sale at the end of April was 444,000. This represents a supply of 9.0 months at the current sales rate
- The median sales price of new houses sold in April 2022 was $450,600
- The average sales price was $570,300
What the experts are saying:
“New homes sales dropped for the fourth consecutive month in April, to the lowest level in two years, closing in on the quarantine-low of April 2020,” said George Ratiu, senior economist and manager of Economic Research at realtor.com®. “High construction costs and surging mortgage rates are keeping many buyers away this spring. A total of only 591,000 homes sold during the month, a 16.6% decline from a downwardly revised March figure, driven by declines in all major regions of the country. Sales of new homes were 26.9% lower than the same month in 2021.
“While new construction gained favor with many would-be buyers over the past two years due to the extreme shortage of existing homes for sale, the rising cost of a new home is now pricing many people out of the market. The median price of a new home jumped 20% higher compared with last year, to $450,600 pushing the monthly mortgage payment $720 higher, a 57% increase at today’s average mortgage rate.
“The market for new homes is mirroring broader real estate trends, as rising inflation is taking a bigger chunk out of Americans’ paychecks and surging borrowing costs are compressing homebuyers’ budgets,” Ratiu continued. “With affordability on a steep decline, new homes have become a luxury for trade-up buyers with significant equity, or investors with cash looking to turn them into single-family rental developments. Not surprisingly, sales of entry-level homes—priced below $300,000—accounted for less than 20% of April’s total new home sales, compared with 38% in 2020. While labor costs remain elevated, a lower price of materials should offer some relief to homebuilders looking to meet buyers in a real estate landscape with less money to go around, and lower affordability. For instance, the price of lumber has been on a steep decline, dropping from $1,314 per thousand board feet in early March 2022 to $667 this week.”
“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,” said Jerry Konter, chairman of the National Association of Home Builders (NAHB) and a home builder and developer from Savannah, Georgia. “Higher construction costs fueled by rising material prices and supply-side constraints along with limited existing home inventory are pricing many potential home buyers out of the market.”
“The April drop for new home sales is a clear recession warning,” said NAHB Chief Economist Robert Dietz. “The median price of a newly built single-family home increased 19.7% year-over-year. The combination of higher prices and increased interest rates are generating a notable slowing of the housing market. 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.”
