New home sales continued trending down in April, dropping 16.6% from March to a seasonally adjusted annual rate of 591,000 homes, according to data released Tuesday by the U.S. Department of Housing and Urban Development (HUD) and the U.S. Census Bureau.
April marked the third consecutive month of declines for new home sales and the lowest annualized rate since April 2020. Year over year, new home sales were down 26.9% in April.
“With interest rates rising more than two percentage points since the start of the year –alongside record-breaking home value appreciation — it is likely many prospective buyers are rethinking what they can afford,” Dan Handy, Zillow’s economist data analyst, said in a statement. “Builders may also be recalibrating for the shifting environment, with material and labor supply shortages continuing to slow construction progress.”
Due to the dip in sales pace, the inventory of new homes rose in April to the highest supply level of new homes since 2010. At the end of the month, 444,000 new homes were still for sale, representing a nine-month supply at the current sales pace.
The existing home sales report for April revealed a similar trend.
Despite the sales slowdown, the median sales price for a new home rose in April to $450,600, up from $436,700 a month prior.
“Affordability is a growing challenge as higher new-home prices and rising mortgage rates are pricing out some buyers,” Odeta Kushi, First American’s deputy chief economist, said in a statement. “One year ago, 25% of new-home sales were priced below $300,000. In April of this year, only 10% of new home sales were priced below $300,000.”
New home sales were down month over month in all four major U.S. regions, with the South seeing the largest drop at 19.8%, followed by the Midwest at 15.1%, the West at 13.8% and the Northeast at 5.9%. Year over year, the Northeast was the only region to record an increase in new home sales, which rose 17.1% compared to April 2021, while the South saw the largest decrease in sales, falling 36.6% from a year prior.
As the pace of new home sales has decreased, homebuilder confidence has also dropped. In May, the National Association of Home Builders (NAHB) and Wells Fargo Housing Market Index (HMI) fell to 69, marking the fifth consecutive month of declines. Experts blame the rising cost of building materials and the sharp spike in mortgage rates for declining builder confidence.