Stabilizing mortgage rates and a lack of resale inventory provided a boost for new home sales in April, even as builders continue to wrestle with rising costs stemming from shortages of transformers and other building materials and a persistent lack of construction workers.
Sales of newly built, single-family homes in April increased 4.1 percent to a 683,000 seasonally adjusted annual rate from a downwardly revised reading in March, according to newly released data by the U.S. Department of Housing and Urban Development and the U.S. Census Bureau. This is the highest level since March 2022.
“A lack of existing inventory supported sales of newly-built, single-family homes in April,” said Alicia Huey, chairman of the National Association of Home Builders (NAHB) and a custom home builder and developer from Birmingham, Ala. “Even more encouraging, we are seeing sales growth in the more affordable price ranges of $200,000 to $400,000.”
“April saw an increase in new home sales as buyers sought new construction even as builders struggle to keep up with demand because of a shortage of distribution transformers and skilled construction workers,” said NAHB Chief Economist Robert Dietz. “Sales for 2023 thus far are still down 9.7 percent on a year-to-date basis due to elevated interest rates, and sales may weaken in the months ahead given the recent rise in interest rates.”
A new home sale occurs when a sales contract is signed or a deposit is accepted. The home can be in any stage of construction: not yet started, under construction or completed. In addition to adjusting for seasonal effects, the April reading of 683,000 units is the number of homes that would sell if this pace continued for the next 12 months.
New single-family home inventory increased 0.2 percent in April and remained elevated at a 7.6 months’ supply at the current building pace. A measure near a 6 months’ supply is considered balanced. However, the lack of resale, existing home inventory means that overall inventory for the single-family market remains tight.
The median new home sale price fell in April to $420,800 and was down 8% compared to a year ago. The report showed growth in the lower price ranges, with 9,000 sales in the $200,000-$299,999 price range in April 2023, compared to just 4,000 sales a year prior. The $300,000-$399,999 price bracket grew by 14,000 sales in that same time frame.
Regionally, on a year-to-date basis, new home sales fell in all regions, down 19.2% in the Northeast, 9.8 percent in the Midwest, 0.7 percent in the South and 27.5 percent in the West.