Lower Prices Boost New US Home Sales; Outlook Downbeat Amid Higher Mortgages
Lower Prices Boost New US Home Sales; Outlook Downbeat Amid Higher Mortgages
Sales of new U.S. single-family homes rose to more than a three-year high in April as builders lowered prices to attract buyers, but rising mortgage rates and economic uncertainty continue to pose challenges to the housing market.
Data for February and March was significantly revised downward, taking some of the shine off last month’s unexpected sales increase reported by the Commerce Department on Friday. The large supply of unsold new housing inventory remains, which, combined with higher borrowing costs, could discourage builders from starting new single-family housing projects and weigh on the market this year.
"Strength in new home sales does not change our view that housing activity is weakening further in the second quarter and is likely to remain soft this year," said Veronica Clark, an economist at Citigroup. "Still-high rates and a slowing labor market will weigh further on housing demand."
New home sales soared 10.9% to a seasonally adjusted annual rate of 743,000 units in April, the highest level since February 2022, the Commerce Department's Census Bureau said. The sales pace for March was revised down to 670,000 units from the previously reported 724,000 units, while February sales were downgraded to 653,000 units from 674,000 units.
Economists polled by Reuters had forecast new home sales, which make up about 15.7% of U.S. home sales, declining to 693,000 units. New home sales, counted at contract signing, tend to be volatile month-to-month and are subject to revisions. They advanced 3.3% year-on-year in April. Sales last month dropped 14.8% in the Northeast but jumped 35.5% in the Midwest and rose 11.7% in the densely populated South. Sales increased 3.3% in the West.
Higher mortgage rates and economic uncertainty amid President Donald Trump’s aggressive trade policies and mass public sector layoffs have sidelined buyers, leaving builders to lower prices and offer incentives to ease the burden of higher borrowing costs.
