Lumber is stacked inside a house under construction in the Barbera neighborhood of Cold Spring in Loudonville, New York, U.S., Wednesday, November 8, 2023.
Angus Mordants | Bloomberg | Getty Images
The U.S. Census Bureau announced Thursday that new home sales in April fell 4.7% from March and 7.7% from the same period last year.
March sales were also revised down sharply.
Higher mortgage rates are clearly hampering sales. The monthly reading is based on signed contracts, so it reflects people shopping that month and signing 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 surged to 7.5% in April, reducing affordability.
Additionally, the median price of new homes sold in April was $433,500, up 4% from April 2023. These buyers are not affected by mortgage rates because they typically use all cash.
Builders say they are unable to lower prices because of the high cost of land, labor and materials. Large production builders have been lowering mortgage rates to help boost sales, but they’ve been able to do that because of their size. Dr. Horton and toll brothers Profitability in recent quarters has been strong, beating expectations, the report said, adding that demand was growing due to a lack of supply in the resale market.
“Despite the talk from the big builders (who are taking market share), new home sales across the new construction industry are running at a slower pace than the five-year average,” said Peter Boockvar, chief investment officer at Bleakley Financial Group, a CNBC contributor.
It would take 38% of the nation’s median household income to pay a mortgage on a median-priced new single-family home in the first quarter of 2024, according to a new index released Thursday by the National Association of Home Builders and Wells Fargo. Low-income households, defined as those earning just 50 percent of the area median income, would have to spend 77 percent of their income to pay for the same new home.
Prices for both new and existing homes continue to rise due to a lack of supply. There are very few items available for sale on the low-end resale market. Although the number of new homes continues to increase, with an annual increase of 12%, the price premium of new homes is beyond the reach of low-income buyers.
“With a nationwide housing shortage of approximately 1.5 million units, the lack of housing units is a major contributor to the growing housing affordability challenge,” said NAHB Chief Economist Robert Dietz. “Policy development at all levels of government “Builders need to enact policy changes that allow builders to build more homes, such as speeding up permit approval times, providing resources for skilled workforce training, and repairing the construction materials supply chain.”
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