New-home sales cooled in April as the supply of existing homes increased and demand was hampered by high mortgage rates.
New-home sales reached a seasonally adjusted annual rate of 634,000 in April, according to data published Thursday by the U.S. Census Bureau and the U.S. Department of Housing and Urban Development (HUD). This figure represents a 4.7% decline from the revised March rate of 665,000, and it also marks a 7.7% pullback from the April 2023 estimate of 687,000 units.
“As the inventory of existing homes has increased, homebuyers have choices and demand for new construction has cooled slightly,” Bright MLS chief economist Lisa Sturtevant said in a statement. “We can also see the inventory of unsold new construction also building up. At the end of April, the new home inventory was 12.1% higher than a year ago, the biggest year-over-year supply gain since December 2022.
“At the same time that supply is starting to increase, demand is being challenged by 7% mortgage rates and affordability ceilings. Homebuilders have been offering concessions and building smaller homes in response to the tight conditions some homebuyers are facing.”
Homebuilder sentiment stalled in May on the back of elevated mortgage rates. In May, 25% of builders cut prices, up from 22% in April, according to the National Association of Home Builders (NAHB). But the average price reduction in May held steady at 6% for the 11th straight month and the use of sales incentives rose to 59% in May, up from 57% in April.
At the end of April, there were 480,000 new homes available for sale. At the current sales pace, there is a 9.1-month supply of new single-family homes, according to census and HUD data.
The median sale price for a new home rose to $433,500 in April. Meanwhile, the median price of an existing home sold last month was $407,600.
“New home sales are vitally important considering the continued shortage of homes in most markets and will continue to gradually increase with solid economic background and availability constraints in the existing market,” CoreLogic chief economist Selma Hepp said in a statement. “Also, the growth in new homes continues to be abetted by builders’ ability to offset falling housing affordability through price discounts, mortgage rate buy-downs, and similar incentives, which will keep the overall share of new home sales elevated.”
As of May 17, there were 578,000 single-family homes unsold on the market, up 1.7% for the week and 36% higher than one year ago, according to Altos Research. Additionally, price cuts are on the rise nationally as 34.4% of the homes on the market last week included a price cut, up 70 basis points from the week prior. Last year at this time, 29.9% of the homes on the market included price cuts.
As of this week, every state has more inventory than a year ago, Altos Research reported. Even New York and Nevada, which were the last holdouts in terms of inventory growth, are now both in positive territory.
Meanwhile, single‐family housing starts in April fell to a seasonally adjusted annual rate of 1.031 million units, 0.4% below the revised March figure of 1.035 million. The overall growth in housing starts last month was driven by the multifamily sector, where the yearly pace ticked up to 322,000 units. But new multifamily starts also continue to track far below year-ago levels, according to Sturtevant.