Rising Mortgage Rates Slow New Home Sales in April
Elevated Rates Contribute to Decline in New Home Purchases
New home sales in declined in April as mortgage rates, that averaged above 7% mid-April, acted as a deterrent for buyers, according to data from Freddie Mac. Sales of newly built, single-family homes dropped 4.7% to a seasonally adjusted annual rate of 634,000, a decline from the revised March figure, per the U.S. Department of Housing and Urban Development and the U.S. Census Bureau. This pace reflects a 7.7% decrease compared to a year ago.
"The last four weeks, mortgage rates have been above 7% and this is clearly causing many potential home buyers to sit on the fence," said Carl Harris, chairman of the National Association of Home Builders (NAHB) and a custom home builder from Wichita, Kan. "However, in the weeks and months ahead, we expect mortgage rates to fall below 7%. Moderating rates, along with a dearth of existing inventory, should help new home sales recover as new construction will be needed to meet the demand for homes, especially during this crucial spring/summer season."
Danushka Nanayakkara-Skillington, NAHB's assistant vice president for forecasting and analysis, noted, "A lack of homes in the resale market, combined with softening of the median new home price, should incentivize home buyers to turn to new construction in the coming months."
Other housing market indicators in April include new single-family home inventory which remained high at 480,000 units, marking a 12.1% increase from the previous year. This represents a 9.1 months' supply at the current sales pace, bolstered by the shortage of resale homes. The median new home sale price in April was $433,500, a 1.4% decrease from March but a 3.9% rise from a year earlier.
Regionally, year-to-date new home sales showed significant increases in the Northeast (22.4%), Midwest (22.3%), and West (14.0%), while the South experienced a 10.5% decline.
https://www.nahb.org/news-and-economics/press-releases/2024/05/new-home-sales-in-april-down-on-higher-mortgage-rates
As seen in LASN magazine, June 2023.
