The numbers: The government said Friday that U.S. new home sales increased 10.9% to a seasonally-adjusted annual pace of 743,000 in April from a revised 670,000 in March. Sales haven’t been this high since February 2022.
As mortgage rates increased in April, Wall Street Journal economists predicted a drop in new house sales.
The data are frequently drastically changed.
Important information: The median price of new homes sold in April was $407,200, which was higher than the previous month’s sales price of $403,700.
Between March and April, the number of new homes available for purchase decreased by 0.6%, resulting in an 8.1-month supply.
All regions saw an increase in sales, with the exception of the Northeast. The Midwest saw a 35.5% increase in sales.
Overall, the new house market is doing better than the resale market. Although both are coping with high supply, builders have managed to maintain consumer enthusiasm.
One of the main ways that builders can sustain demand is through incentives. To keep customers interested, they’re lowering prices even further and providing other benefits. The National Association of Home Builders reports that 34% of builders lowered home prices in May, the largest percentage since December 2023. Price reductions averaged 5%.
However, it’s unclear if builders can sustain this momentum as consumers’ concerns about the economy intensify.
Considering the future: “Home builders probably won’t be able to maintain this speed into the summer. In a letter to clients, Ben Ayers, senior economist at Nationwide Financial, stated, “We continue to see the overall housing market stuck in a lower gear over 2025 until mortgage rates drop enough to drive a more sustainable boost in sales activity.”
He said that the fact that housing starts have already decreased indicates that there will be fewer new homes available in the future.
Market reaction: The 10-year Treasury yield, BX:TMUBMUSD10Y, dropped to 4.525% in early morning trading on Friday, while stocks, SPX, began lower.
