New Home Sales Fall Again, Even As Rates Decline for 2nd Week

 ARLINGTON, Va.—New home sales fell 16.6% in April to 591,000 annualized units, while March saw a downward revision of 54,000 units. The sales slowdown comes even as rates have declined nationally for a second straight week.

Curt Long, NAFCU

Compared to last year, April sales were 26.9% lower, reported NAFCU Chief Economist and Vice President of Research Curt Long.

“Rising rates and high prices are putting the brakes on a market that had significant momentum just a few months ago,” said Long. “While the total number of homes for sale grew by 8.3% in April to 444,000, only 38,000 of those homes are complete. The supply chain and labor shortages are delaying the completion of homes and continuing to limit the supply of completed new homes relative to demand."

Based on current month sales, there were nine months of supply in April, up by 2.1 months from March. Unsold homes left on the market increased by 34,000 homes to 444,000, representing a 40.1% increase from year-ago inventory levels.    

"Median prices continue to advance, reflecting a market that is still undersupplied despite the pullback in demand,” added Long. "According to the National Association of Home Builders/Wells Fargo Housing Market Index, builder confidence in the market for new single-family homes fell for the fifth straight month and hit the lowest level since June 2020." 

Sales Down in All Regions

Sales fell in all Census regions in April, with the South falling 19.8%, followed by the Midwest (-15.1%), the West (-13.8%), and the Northeast (-5.9%).

Of note, the median home price, non-seasonally adjusted, rose by 3.6% in April to $450,600, which is 19.6% higher than last year.   

“NAFCU expects new home sales to be volatile in the near term as the market finds equilibrium, but sales totals are unlikely to fall too far given the strength of household finances and the fact that there is still unmet demand in the marker," concluded Long.

Rates Decline, But…

Data from the Mortgage Bankers Association (MBA) show rates declined for a second straight week, but remain significantly higher than they have been for much of the past two years.

The MBA reported that last week the average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($647,200 or less) decreased to 5.46% from 5.49%, with points dropping to 0.60 from 0.74 (including the origination fee) for loans with a 20% down payment.

Nevertheless, the same data show applications to refinance a home loan dropped 2% for the week and were 75% lower than the same week one year ago.

"Most refinance borrowers continue to remain on the sidelines as a result, and refinance applications have fallen in nine of the past 10 weeks. Compared to January 2022, refinance activity is down 66%," said Joel Kan, MBA's associate vice president of economic and industry forecasting, in a statement.

Applications for a mortgage to purchase a home were flat week to week and down 16% from a year ago, according to the MBA.