Sales of newly built homes in April posted their biggest drop in nine years, the latest sign that higher interest rates are reducing buyer demand.
New-home sales fell 16.6% in April from March to a seasonally adjusted annual rate of 591,000, the lowest level since April 2020, the Commerce Department said Tuesday.
Rising mortgage-interest rates have made homeownership more expensive for buyers. The average rate on a 30-year fixed-rate mortgage was 5.25% last week, up from 3.1% at the start of the year, according to Freddie Mac.
The 16.6% decline was the biggest monthly drop since 2013.
“‘The entry-level consumer, which is the largest buyer group, is moving to the sidelines’”
“The entry-level consumer, which is the largest buyer group, is moving to the sidelines,” said
Margaret Whelan,
chief executive of Whelan Advisory, a boutique investment bank for the housing industry.
New-home sales, which make up more than 10% of all U.S. home sales, are tracked when contracts are signed, while existing-home sales are tracked when contracts close. That makes new-home sales a leading indicator of where the market is headed.
“I’m very certain it’s going to continue,” said John Burns, CEO of John Burns Real Estate Consulting, referring to declining numbers of new-home sales.
Economists surveyed by The Wall Street Journal had expected a 1.7% monthly decline in new-home sales.
New-home sales are volatile and often subject to revision. But their drop last month follows other signs that record-high home prices, limited inventory and rising mortgage rates are cooling the housing market. Existing-home sales have fallen for three straight months, with April sales hitting the lowest seasonally adjusted annualized rate since June 2020, while mortgage applications to purchase homes fell sharply on a seasonally adjusted basis in the second week of May.
Home builder stocks slid in response to the new-home sales figures.
D.R. Horton Inc.
shares traded down 3% at $65.43 as of early afternoon Tuesday, and
Lennar Corp.
shares fell 3.9% to $71.24.
While higher mortgage rates have started to reduce buyer demand, home prices remain sky high as demand continues to exceed supply. The level of existing homes for sale is unusually low, pushing buyers into bidding wars.
The median new-home sales price rose to $450,600 in April, up 19.6% from a year earlier, the Commerce Department said.
Builders have helped shoppers lock in mortgage-interest rates in recent months, but their wait lists of prospective buyers have been shrinking, Mr. Burns said.
Mr. Burns said he expects new-home prices to decline in areas with ample new-home supply, especially in Texas. “Once the builders have a lot of finished unsold homes, and probably before then, they’re going to start discounting,” he said.
Write to Nicole Friedman at nicole.friedman@wsj.com
Copyright ©2022 Dow Jones & Company, Inc. All Rights Reserved. 87990cbe856818d5eddac44c7b1cdeb8
Sales of newly built homes in April posted their biggest drop in nine years, the latest sign that higher interest rates are reducing buyer demand.
New-home sales fell 16.6% in April from March to a seasonally adjusted annual rate of 591,000, the lowest level since April 2020, the Commerce Department said Tuesday.
Rising mortgage-interest rates have made homeownership more expensive for buyers. The average rate on a 30-year fixed-rate mortgage was 5.25% last week, up from 3.1% at the start of the year, according to Freddie Mac.
The 16.6% decline was the biggest monthly drop since 2013.
“‘The entry-level consumer, which is the largest buyer group, is moving to the sidelines’”
“The entry-level consumer, which is the largest buyer group, is moving to the sidelines,” said
Margaret Whelan,
chief executive of Whelan Advisory, a boutique investment bank for the housing industry.
New-home sales, which make up more than 10% of all U.S. home sales, are tracked when contracts are signed, while existing-home sales are tracked when contracts close. That makes new-home sales a leading indicator of where the market is headed.
“I’m very certain it’s going to continue,” said John Burns, CEO of John Burns Real Estate Consulting, referring to declining numbers of new-home sales.
Economists surveyed by The Wall Street Journal had expected a 1.7% monthly decline in new-home sales.
New-home sales are volatile and often subject to revision. But their drop last month follows other signs that record-high home prices, limited inventory and rising mortgage rates are cooling the housing market. Existing-home sales have fallen for three straight months, with April sales hitting the lowest seasonally adjusted annualized rate since June 2020, while mortgage applications to purchase homes fell sharply on a seasonally adjusted basis in the second week of May.
Home builder stocks slid in response to the new-home sales figures.
D.R. Horton Inc.
shares traded down 3% at $65.43 as of early afternoon Tuesday, and
Lennar Corp.
shares fell 3.9% to $71.24.
While higher mortgage rates have started to reduce buyer demand, home prices remain sky high as demand continues to exceed supply. The level of existing homes for sale is unusually low, pushing buyers into bidding wars.
The median new-home sales price rose to $450,600 in April, up 19.6% from a year earlier, the Commerce Department said.
Builders have helped shoppers lock in mortgage-interest rates in recent months, but their wait lists of prospective buyers have been shrinking, Mr. Burns said.
Mr. Burns said he expects new-home prices to decline in areas with ample new-home supply, especially in Texas. “Once the builders have a lot of finished unsold homes, and probably before then, they’re going to start discounting,” he said.
Write to Nicole Friedman at nicole.friedman@wsj.com
Copyright ©2022 Dow Jones & Company, Inc. All Rights Reserved. 87990cbe856818d5eddac44c7b1cdeb8