New home sales rose in April, climbing to a level not seen in over a year, as mortgage rates eased and buyers looked to new construction as an alternative to the low inventory of existing homes for sale.
Sales of newly constructed homes were up 4.1% in April from March, and up 11.8% from a year ago, according to a joint report from the US Department of Housing and Urban Development and the US Census Bureau.
April’s month-over-month gain is further evidence that the new construction market is being boosted by exceptionally low inventory of existing homes for sale. Homeowners with ultra-low mortgage rates are reluctant to sell and buy another home at a much higher rate. Sales of existing homes has been down for the past two months while new home sales have been rising.
Sales of new single‐family houses were at a seasonally adjusted annual rate of 683,000, up from a revised 656,000 in March. Sales were higher than last year’s estimated rate of 611,000.
After climbing through much of February, mortgage rates reached as high as 6.73% in early March. But as uncertainty moved through the financial industry due to bank failures in mid-March, rates fell during the rest of the month, according to the weekly average rate from Freddie Mac, and have been under 6.5% since mid March. This drop in rates brought an increase in mortgage applications.
In some good news for buyers, prices of new homes dropped from March, the report showed. The median price for a new home dropped to $420,800 in April, down from a revised $455,800 the previous month.
Sales were uneven nationally, with an increase in the South and Midwest and a decline in the Northeast and West. In April, sales grew 17.8% to a seasonally adjusted annual pace of 443,000 in the South and sales rose 11.8% to 76,000 in the Midwest. But sales were down 9.1% to a seasonally adjusted annual pace of 140,000 in the West and sales sank 58.6% to 24,000 in the Northeast.
“New home sales growth can be attributed in part to a resilient job market, which has remained relatively stable despite other economic woes,” said Kelly Mangold of RCLCO Real Estate Consulting. “Low unemployment rates and work-driven relocations continue to fuel sales, along with traditional demographic drivers.”
In addition, she said, home builder sentiment remains high, as the lack of resale inventory has allowed for strong sales and the ability to maintain pricing power due to inventory scarcity in many regions.