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Sales of newly built single-family homes rose in April, pointing to continued buyer interest during the spring homebuying season, the latest data from the U.S. Census Bureau and Department of Housing and Urban Development (HUD) suggests.
However, a few growing concerns, namely rising cancellation rates, softening builder sentiment and affordability challenges, could weigh on future momentum.
New residential sales increased 10.9 percent from March to a seasonally adjusted rate of 743,000 units. That’s also a 3.3 percent boost over the April 2024 pace of 719,000 units.
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“Builders are off to a better spring than expected, despite higher mortgage rates in April,” First American Deputy Chief Economist Odeta Kushi said in a statement. “New-home sales in April beat consensus expectations and jumped approximately 11 percent above the March seasonally adjusted rate, even beating last April’s seasonally adjusted pace by 3.3 percent.”
The median sales price for new homes sold in April was $407,200, up 2 percent from March but down 2 percent year over year. The average sales price reached $518,400, up 3.7 percent month over month and 3.6 percent year over year.
“While the median sales price of a new home ticked up slightly on a month-over-month basis, prices are down 2 percent from a year ago,” Kushi added.
Odeta Kushi | First American Deputy Chief Economist
“Generally, new-home prices have been trending lower since prices peaked in 2022. This is in part an indication that builders are increasingly leaning on price incentives to support demand, but it’s also indicative of a shift in sales being concentrated at lower price points. For example, one year ago, 46 percent of new-home sales were priced below $400,000, whereas in April of this year that share increased to 49 percent.”
However, not all signs point to smooth sailing.
“While today’s report appears optimistic at first glance, there are underlying concerns,” Kushi warned. “The new-home sales report does not adjust figures to account for cancellations of sales contracts. Redfin recently highlighted a rise in home sales cancellations due to affordability challenges and heightened economic uncertainty. This trend suggests that sales figures might be overestimated.”
On top of that, builder sentiment is showing signs of strain, with builder sentiment dropping to its lowest level since November 2023. Expectations for single-family sales over the next six months have also declined to their lowest point since November 2023.
By the end of April, there were an estimated 504,000 new homes for sale, down slightly by 0.6 percent from March, but up 8.6 percent from April 2024. This figure represents 8.1 months of supply at the current sales rate.
“Despite the demand waiting on the sidelines and builders’ ability to offer incentives to attract buyers, the outlook remains clouded by uncertainty,” Kushi said.
