US new home sales miss expectations in April

WASHINGTON: Sales of new US homes were weaker than analysts expected in April, government data showed Thursday, with slower mortgage demand appearing to bog down the number of transactions.

New single-family home sales came in at an annual rate of 634,000 last month, seasonally adjusted, down 4.7 per cent from March's 665,000 rate, said the Commerce Department.

The figure for March was revised lower, while April's numbers were below a consensus forecast of 680,000.

Home sales have taken a hit since the Federal Reserve raised the benchmark lending rate rapidly in 2022 to curb surging inflation.

But significantly higher mortgage rates have also made homeowners reluctant to sell their properties, leading to tighter supply and pushing buyers into the market for new construction.

While a 30-year fixed-rate US mortgage averaged around three percent in May 2021, the average rate as of May 16 was around 7.0 percent.

This has given the new homes market a boost in past months.

Compared with the same period a year ago, however, sales of new homes were 7.7 percent lower in April.

The median sales price was US$433,500, slightly lower than in March, the Commerce Department said.

While sales data can be volatile and revised later, the April selling pace was lower than the first quarter average of 653,000, noted Rubeela Farooqi, chief US economist at High Frequency Economics.

"The new home sales report completes a trifecta of bad news in housing this week," said economist Robert Frick of the Navy Federal Credit Union.

"Building is anemic, existing home sales missed estimates and now new home sales had a big drop and remain tepid overall," he added in a statement.

While lower interest rates will support builders and buyers, this is "especially because we need robust building to make up for weak construction in the 2010s," Frick said.

Economist Oliver Allen of Pantheon Macroeconomics expects mortgage rates to decline in the coming quarters, "partly in response to a softening labor market."

"That would be a mixed blessing for home sales since it would reduce the pool of potential homebuyers," he said.

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