Due to the combination of high home prices and steeply climbing interest rates, new home sales plunged to a level not seen in nearly nine years.
New-Home Sales Report Shows Sales Plunging, Home Prices Rising & Inventory Improving in April
A just released new-home sales report produced by the US Census Bureau and the US Department of Housing and Urban Development (HUD) showed that new single-family home purchases in April 2022 nosedived -16.6% to an annualized 591,000 pace, the weakest since April 2020. (A Bloomberg survey of economists estimated that 749,000 new single-family homes would have been sold in April.)
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Coincidentally, homebuilders’ shares, including DR Horton Inc. and Lennar Corp., on the S&P plunged -4.3% upon the release of this above-mentioned report.
This Census Bureau/HUD report on new-home sales also indicated that the median sales price of a new single-family home skyrocketed +19.6% y/y to a record $450,600.
Inventory of new single-family homes reached 444,000 by the end of April, the most newly built single-family homes since 2008. However, nearly all of these 444,000 homes were not yet finished nor ready fro occupancy completely by the end of the month.
It would take 9 months to sell April’s supply of new homes. This nine-month-pace-of-sales compares to the 6.9-month-pace-of-sales in March and the 4.7 month-pace-of-sales one year ago.
Home Ownership Increasingly Out of Reach
As the rapid run-up in mortgage rate collides with record-high new home prices, more and more Americans are being priced out of the housing market. According to Freddie Mac data, the average rate on a 30-year fixed-rate mortgage hit 5.25% last week.
“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 with Navy Federal Credit Union.
Additionally, as we posted last week, the report from Wells Fargo/National Association of Homebuilders indicated that homebuilder sentiment dropped in May for the fifth straight month as homebuilders are worried about increasing construction costs and a slowdown in demand.
Additional Information in New-Home Sales Report
- Backlogs increased in April – the number of homes sold in April and waiting for the start of construction to begin rose to 185,000
- Sales of existing for-sale homes plunged in April to the lowest level since June 2020 due to growing affordability issues
- Sales declined in all four US regions: sales down -19.8% in the South (the country’s largest region) and sales fell -15.1% in the West.
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Thanks to Bloomberg.
