New home sales are finally starting to slow down across the US, but they have a long way to go to get to typical levels. US Commerce Department data shows new home sales fell in April. The drop was also accompanied by a large revision for the previous month. It’s too soon to tell if record demand is totally past the peak, but record home price growth is definitely slowing.
US New Home Sales Fell Nearly 6%
US new home sales took a dive last month, but are still much higher than last year. The seasonally adjusted annual rate (SAAR) of home sales fell to 863,000 in April, down 5.9% from a month before. Compared to a year before, home sales are still 48.3% higher. Last month experienced a sharp drop, but sales are still higher for now.
US New Home SalesThe seasonally adjusted annual rate (SAAR) of US home sales. Source: US Census; HUD; Better Dwelling.
Sharp Revision For March’s New Home Sales
Accompanying the decline in new US home sales was a big revision of prior data. The SAAR of new home sales was revised to 917,000 for March, down 10.19% from the original number. That revision is before the drop in the previous paragraph. April sales are 15% lower than where people thought March sales were prior to today. A huge shift in reality vs expectations. Virtually all forecasts for April sales had them well into the 900,000s.
US Sales of Pre-Construction Homes Rise
Breaking down new home sales — pre-sales, or not yet built homes, are being sold at a higher clip. The SAAR of pre-construction new homes represented 325,000 of April’s sales, up 16.49% from the month before. This likely has to do with the recent surge in demand for new homes, meeting the material squeeze over the past few months.
Sales of new homes that were already under construction or completed, fell. The SAAR under-construction home sales reached 306,000 in April, down 20.93% from the month before. The SAAR of completed new home sales fell to 232,000, down 7.57% over the same period. Buyers may just be looking for more immediate inventory in the resale market. They might be priced out altogether. This won’t be totally clear until later this year.
It’s too soon to say this trend is on the way out, but low interest rates pulled forward demand. As the pulled forward demand normalizes, the unsustainably high sales will fall. Homebuyers are also dealing with record home price growth. This is also likely curbing qualified demand for new home sales.
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