Sales of newly built homes tumbled over 16% in April while prices soared

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  • Sales of newly constructed homes have declined at the slowest rate since the start of the COVID pandemic.
  • The average price of a new home sold in April was $450,600, which is about 20% higher than the year before.
  • Slow sales led to a sharp jump in the inventory of newly built homes as well as nine months’ supply. A six-month supply is generally considered to be balanced between buyer and seller.

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According to the US Census, sales of newly built homes fell 16.6% in March to April, higher than expected, and were down 26.9% from April 2021.

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The annual rate came in at 591,000 units, adjusted seasonally. Analysts were expecting 750,000. March’s reading was also less revised.

This is the slowest sales pace since April 2020, when everything shut down at the start of the COVID pandemic. Sales grew rapidly after that, as Americans sought larger homes with outdoor spaces to quarantine.

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These numbers are based on contracts signed during the month, not closing, so it is probably the most up-to-date indicator in the housing market. Mortgage rates, which have been rising since January, actually rose in April. According to Mortgage News Daily, the average rate on a 30-year fixed loan started the month at 4.88% and ended it at 5.41%.

Consumers are being affected by rising interest rates and four decades of high inflation. This is making it even more difficult for them to afford the high house prices of today. The average price of a new home sold in April was $450,600, which is about 20% higher than the year before.

“While new construction favored many buyers over the past two years due to the extreme paucity of existing homes for sale, the rising cost of a new home is now driving many people off the market,” said George Ratio, Senior Economist at Realtor.com. “The market for new homes is mirroring broader real estate trends, as rising inflation is taking a large chunk out of Americans’ paychecks and rising borrowing costs are compressing homebuyers’ budgets.”

A sharp drop in demand, and not over-manufacturing, is impacting the market. Housing starts have really been falling over the past few months. Slower sales caused inventory of newly built homes to jump sharply to a nine-month supply. A six-month supply is generally considered to be balanced between buyer and seller.

Builders are also seeing a spurt in cancellation rates. While they haven’t shown up in the earnings release yet, analysts who follow the builders have started reporting it.

Credit: www.cnbc.com /

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