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April new-home sales slide, but are still strong

March’s historic spike of new-home sales gave way to smaller, though still stout, numbers in April, according to new estimates from the U.S. Census Bureau and the U.S. Department of Housing and Urban Development.

House under constructionSales of new single-family houses in April were at a seasonally adjusted rate of 673,000, down 6.9 percent from the revised annualized pace of 723,000 seen in March. The March figure is notable for having the highest single-month sales rate since the Great Recession. Economists, therefore, characterized April’s rate as still solid despite the relative decline.

“While the headline figures are disappointing, this decline in new-home sales does not reflect the overall health of the housing market,” said Matthew Speakman, an economic data analyst at Zillow. “The strong reading from March greatly exceeded expectations and was revised upward today; without that revision, April’s month-over-month decline would be just 2.7 percent –and the underlying trend in sales remains strong.”

Robert Dietz, chief economist for the National Association of Home Builders (NAHB), noted that April’s new-home sales rate was the third strongest of the current housing cycle. This past April's rate also is 7 percent higher on a year-over-year basis.

Dietz chalked up the strong March and April figures not only to lower mortgage rates relative to late 2018, but also to an increased use of builder price incentives in March. The April rise of median new-home sales prices to $342,200 (compared to $305,800 in March) suggests a reduction in the use of such incentives, which may account for part of the sales-volume decrease.

Inventory, on the other hand, continued a downward trend after peaking at the start of the year. January’s supply of 347,000 new homes for sale ebbed to 332,000 in April. The number of homes currently under construction also has decreased, from 211,000 in January to 188,000 in April.

Still, there are positives on the supply side. Year-over-year inventory of new single-family homes is still up: In April 2018, there were only 299,000 such homes available. The inventory of newly completed, ready-to-occupy single-family homes also is up on an annual basis, from 61,000 in April 2018 to 77,000 last month. There are 5.9 months of new-home supply, a more normalized figure according to NAHB.

“Builders are finding ways to deliver homes despite expensive land and labor prices, a boon to buyers thirsty for more supply,” Speakman said. “Strong builder confidence was borne out by last week’s encouraging home-starts figures, which suggest that the supply of new homes is poised for growth. This strength, combined with enduring low mortgage rates and a historically strong job market, suggest that today’s reading [of the April sales numbers] is just a slight step back in the continued recovery of new-home sales.”


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