New Single-Family Home Sales Plunged in April as Prices and Mortgage Rates Continue to Rise

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Sales of new single-family homes plunged in April, declining 16.6 percent to 591,000 at a seasonally-adjusted annual rate from a 709,000 pace in March and just slightly ahead of the 582,000 pace at the bottom of the lockdown recession. The April drop follows a 10.5 percent decline in March, a 4.7 percent fall in February, and a 1.0 percent drop in January. The four-month run of decreases leaves sales down 26.9 percent from the year-ago level (see first chart). Meanwhile, 30-year fixed rate mortgages were 5.3 percent in late May, up sharply from a low of 2.65 percent in January 2021 (see first chart).

Sales of new single-family homes were down in all four regions of the country in April. Sales in the South, the largest by volume, fell 19.8 percent while sales in the Midwest dropped 15.1 percent, sales in the West decreased 13.8 percent and sales in the Northeast, the smallest region by volume, sank 5.9 percent for the month. From a year ago, sales were up 17.1 percent in the Northeast but were off 12.4 percent in the West, down 25.5 percent in the Midwest, and off 36.6 percent in the South to the lowest level since December 2016 (see second chart).

The median sales price of a new single-family home was $450,600 (see third chart), up from $435,000 in April (not seasonally adjusted). The gain from a year ago is 19.6 percent versus a 21.0 percent 12-month gain in April. On a 12-month average basis, the median single-family home price is still at a record high.

The total inventory of new single-family homes for sale jumped 8.3 percent to 444,000 in April, putting the months’ supply (inventory times 12 divided by the annual selling rate) at 9.0, up 30.4 percent from April and 91.5 percent above the year-ago level (see fourth chart). The months’ supply is at a very high level by historical comparison and is approaching peaks associated with prior recessions (see fourth chart). The plunge in sales, high months’ supply, and surge in mortgage rates should weigh on median home prices in coming months and quarters. However, the median time on the market for a new home remained very low in April, coming in at 2.8 months versus 3.9 in March.