Sales of newly built homes tumbled in April after an unexpected boost in March as elevated mortgage rates and broader volatility eroded homebuying momentum at the start of the spring sales season.

Figures published Thursday by the U.S. Census Bureau and the Department of Housing and Urban Development show the annualized pace of new-home sales dropped 6.2% between March and April while plunging more than 11% from year-ago levels.

The fate of April new-home sales was already in the cards, however, with the Mortgage Bankers Association reporting earlier this month that new-home mortgage applications dropped 10% from March and 2.4% from a year ago in April — the first month of annual declines in new-home mortgage demand since last October.

But the seasonally adjusted sales pace of 622,000 in April was also below February’s pace of 641,000 units, when average mortgage rates on typical 30-year home loans hovered around 6%. Mortgage rates spent April around 6.3% due to impacts of the Iran war, according to Freddie Mac data.

Mortgage rates have trended closer to 6.5% for much of May, undergirding a lack confidence that the new-construction market can course-correct by the end of the year, unless a sharp reversal in homebuying affordability emerges. Inflation is surging amid the ongoing war in Iran and margins are crumbling for households and builders alike.

A sharp monthly uptick in the median price of new homes sold last month reflected layered affordability challenges impinging on sales production. Median new-home sales prices increased 8% over the month to $422,500 in April from $391,100 in March.

Odeta Kushi, deputy chief economist at title insurance giant First American Financial Corp., said the increase in prices “likely reflects product mix more than renewed pricing power” in commentary on the monthly figures shared with Scotsman Guide.

“While headline prices moved higher in April,” said Kushi, “the increase appears to reflect a greater share of higher-end homes sold, rather than a broad uptick in home-price appreciation.” She flagged that 55% of new builds sold in April were priced at $400,000 or higher, compared to 47% sales share for that price tier in March.

Still, the new-home sales pace in April was 3% higher than pre-pandemic April levels, and continues to outperform the existing-home sales market, according to Kushi.

“Builders remain better positioned than existing homeowners to respond to affordability challenges through incentives, mortgage-rate buydowns and smaller floor plans,” she said.

A larger share of first-time buyers have taken out purchase mortgage loans this spring on account of mortgage rate lock-in effects that have sidelined existing homeowners. This trend compounds the difficulty builders are facing in offloading significant inventory backlogs.

As a result, builders are leaning on the more flexible mortgage qualification guidelines in government loan programs to close deals, experts tell Scotsman Guide.

“Builders will also be facing increased competition from rising resale inventory,” said Orphe Divounguy, senior economist at Zillow, remarking on the sharp decline in sales in a research note. “With fewer new construction homes in the pipeline, new home sales could stabilize at a lower level than in recent years.”

But, ultimately, home builders are staring down the barrel of yet another year of lackluster sales activity as affordability pressures and economic uncertainty quell homebuying demand for new and existing homes alike. Though home builders’ six-month sales outlook brightened slightly in May, overall confidence has been deeply pessimistic for two years.

The Census Bureau estimates that new houses for sale at the end of April totaled 489,000, about 1.7% higher than March and 2.2% higher than a year ago. The sales slowdown pushed the months’ supply of new homes up 8% over the month to 9.4 months, reflecting how long it would take new-home inventories to deplete at the current sales pace.

That months’ supply is even wider from year-ago levels, up 9.3% in a sign of how difficult it has been for builders to better align their construction and sales funnels.

Only one region of the U.S. has seen higher year-to-date sales through April compared to year-ago levels, according to a market analysis published Thursday by the National Association of Home Builders (NAHB). Year-to-date sales are 7.3% higher in the Midwest, but down 9.7% in the Northeast, 7.6% in the South and 9.5% in the West.

“Elevated mortgage rates, higher inflation and economic uncertainty kept more buyers on the sidelines in April as ongoing affordability challenges continue,” said NAHB Chief Economist Robert Dietz in the analysis. “New home sales are on track to decline in 2026 as mortgage rates are expected to remain elevated in the months ahead.”

Until new-home inventories consistently sell at a faster clip, single-family housing starts currently poised for a second consecutive year of declines are unlikely to meaningfully increase. That has led some economists to caution that a longstanding housing supply shortage in the U.S. may likely to worsen before it improves.