A pile of lumber at a home under construction in the Cold Spring Barbera Homes subdivision in Loudonville, New York, US, on Wednesday, November 8, 2023.
Angus Mordaunt | Bloomberg | Getty Images
Newly built home sales fell 4.7% in April from March, and fell a larger 7.7% from a year earlier, the U.S. Census said Thursday.
March sales were also revised downward significantly.
Obviously, high mortgage rates are hindering sales. The monthly reading is based on signed contracts, so it reflects people shopping during the month and making deals based on current prices.
The average interest rate on a 30-year fixed mortgage was in the high 6% range at the end of March, but then rose to 7.5% during April, tightening affordability.
Additionally, the median price of a new home sold in April was $433,500, 4% higher than it was in April 2023. Part of that is due to the mix of home sales, most of which are at the upper end of the market. These buyers are not affected by mortgage rates, as they often use all cash.
Builders say they cannot lower prices because of high costs of land, labor and materials. The major labels have bought into lower mortgage interest rates to help boost sales, but they are able to do so because of their size. Dr. Horton And Take care of the brothers It has reported strong earnings in recent quarters, beating expectations and citing increased demand due to low supply in the resale market.
“Despite all the happy talk from big builders (who are grabbing market share), the entire new construction industry is selling new homes at a slower pace,” noted Peter Boockvar, chief investment officer at Pleakley Financial Group. than the five-year average. CNBC Contributor.
In the first quarter of 2024, 38% of the median household income nationally would be needed to make mortgage payments on a new median-priced single-family home, according to a new index launched Thursday by the National Association of Home Builders and Wells Fargo. . Low-income families, defined as those earning just 50% of the area median income, would have to spend 77% of their income to pay for the same new home.
Prices continue to rise for both new and existing homes due to lack of supply. There are very few products available for sale at the lower end of the resale market. While the number of newly built homes continues to rise, by 12% year over year, new homes come at a price premium and are out of range for low-income buyers.
“With a nationwide shortage of about 1.5 million homes, the housing shortage is the primary reason for growing housing affordability challenges,” said Robert Dietz, chief economist at NAHB. “Policymakers at all levels of government need to enact policy changes that will allow builders to build more homes, such as speeding up permit approval times, providing resources to train skilled workers and fixing building materials supply chains.”