Key Highlights

  • New home sales rose +0.6% in April from one month earlier, according to US Census Bureau
  • Still down -6% from one year ago but much better than anticipated by economists polled by FactSet

Because existing home sales collapsed in April, most market experts expected new home sales to simply follow suit. Instead, new home sales rose +0.6% in April while economists polled by FactSet predicted they would fall – 22%.

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True, an increase of +0.6% in new home sales doesn’t sound like much but an increase of +0.6% is A LOT better than a drop of -22% from one month to the next.

This slight increase in new home sales combined with a slight increase in the Consumer Confidence Index survey conducted by the Conference Board are two pieces of good news. Could a recovery be on the way?

Dean Mon, chairperson of the National Association of Homebuilders (NAHB), said, “The April data for new home sales show the potential for housing to lead any recovery for the overall economy. Because the housing industry entered this downturn underbuilt, there exists considerable pent-up demand on the sidelines. The experience of the virus mitigation has emphasized the importance of home for most Americans.”

Mathew Speakman, an economist with Zillow, agreed. “…the unexpected strength in April new home sales may be…the clearest indicator so far that housing, so unlike the last time around, will be a source of relative strength during this downturn.”

Why are newly constructed homes selling better than existing homes?

  • There is a much larger supply of newly constructed homes available for sale…a 6.3month supply in April whereas existing for-sale home inventories stood at a 4.2 month supply, according to the National Association of REALTORS® (NAR).
  • The ease of showing a new home to potential buyers is much greater than showing an existing home for sale. New homes are unoccupied and often have various floor plans available online.
  • Potential buyers who are concerned about catching the coronavirus while touring existing homes (especially when occupied) are much more relaxed about touring new, empty homes that are seemingly less contaminated with COVID-19.
  • Since newly constructed homes are most often built in suburbs or exurbs, some potential buyers may be looking to buy and live in locations outside of cities that are less dense after living through the pandemic within close, urban quarters.
  • The median price of a newly constructed home was $309,900 in April, the lowest since July 2019.

 

Thanks to CNBC, Barons and MarketWatch.

Also read: Prelude to 2020 – Home Prices Up As Well As New Home Sales in November, How Some Homebuilders Coping with Impacts of Coronavirus, Podcast: 2021 Housing Market Predictions | Corelogic Home Value Report | Tim and Julie Harris