Sales of new single-family houses in the U.S. dropped significantly more than expected last month to the lowest level in two years as rising construction costs, home prices, interest rates and supply chain woes continue to batter the industry.
The U.S. Census Bureau's latest data shows the pace of new home sales fell by 16.6% in April from the month before at a seasonally adjusted rate of 591,000. Analysts surveyed by Refinitiv anticipated a dip of 1.7%.
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The drop is 26.9% lower than a year ago, and the lowest since April 2020. This is the fourth straight month new home sales have declined.
"April’s dismal new home sales data shows an industry besieged by higher construction costs, supply chain disruptions and by higher mortgage rates that are giving many potential buyers cold feet," said Robert Frick, corporate economist at Navy Federal Credit Union.
"Given the pipeline for bringing new homes to market is stretched so thin, we shouldn’t expect home building to add much to housing stock for the foreseeable future," he added.
The Census Bureau reported that the median sales price of new homes hit $450,600 last month. With interest rates now upward of 5%, the rising cost of homeownership is pricing more would-be buyers out of the market.
"One year ago, 25% of new home sales were priced below $300,000," explained Odeta Kushi, deputy chief economist at First American. "In April of this year, only 10% of new home sales were priced below $300,000."
Inventory of new homes was also up last month, according to government data.
"New home months' supply jumped to 9 months, up from 6.9 months in March and the highest since 2010," Kushi noted, predicting, "Builders will likely slow construction in the months ahead."