New-Home Sales Bring Spring Disappointment
May 24, 2018
Sales of newly built single-family homes fell in April—a time that is usually the bustling springtime home buying market. But builders remain upbeat and are quick to point out that sales are still near a post-recession high, regardless of the latest drop.
Sales of newly built, single-family homes dropped 1.5 percent in April, reaching a seasonally adjusted annual rate of 662,000 units, the U.S. Commerce Department reported Wednesday.
“Builders are optimistic that more prospective buyers will enter the market in the months ahead,” says Randy Noel, chairman of the National Association of Home Builders.
Regionally, new-home sales last month posted a significant drop in the West, with new-home sales falling 7.9 percent month-over-month in April after a very strong March. New-home sales rose 11.1 percent in the Northeast in April, and rose by 0.3 percent in the South. New-home sales remained unchanged in the Midwest.
Inventories crept up slightly. The inventory of new homes for sale was 300,000 in April, a 5.4-month supply at the current sales pace. The median sales price of a new house sold was $312,400, which is 0.4 percent higher than a year ago.
Inventories are low but within averages since 2013, and the regional breakdown isn’t showing any clear signs of adverse weather that could be hampering new-home sales, Andrew Grantham with CIBC told MarketWatch. “Instead, we could be seeing some early signs that rising interest rates are taking some momentum out of the market,” he notes.
Builders remain optimistic that the dip in sales last month was just a temporary hiccup. “With job growth, rising incomes, and overall economic strengthening, we can expect housing demand to continue to grow, particularly among millennials and other newcomers to the market,” says Michael Neal, senior economist at the National Association of Home Builders. “However, builders need to manage rising construction costs as well as regulatory hurdles to keep their homes competitively priced.”
Updated: November 16, 2018