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Rising prices in the new-home market prompted buyers to take a step back in April. The sale of newly built, single-family homes fell 16.6% in April, dropping to their weakest pace in two years, the Department of Housing and Urban Development and the U.S. Census Bureau reported Tuesday. Rising mortgage rates are worsening affordability conditions, builders say.
New-home sales are down nearly 27% compared to a year earlier, the report shows.
“The volume of signed sales contracts significantly declined in April as the cost of purchasing a home increased in 2022 as interest rates surged higher,” says Jerry Konter, chairman of the National Association of Home Builders. “Higher construction costs fueled by rising material prices and supply-side constraints along with limited existing home inventory are pricing many potential home buyers out of the market.”
The entry-level market is experiencing the largest drops in sales, as affordability conditions particularly worsen there, builders say. A year ago, 25% of new-home sales were priced below $300,000. In April, just 10% of homes were under $300,000.
The median price of a newly built, single-family home rose 19.7% year over year. The median sales price increased to $450,600 in April. Builders said the higher costs are primarily due to surging building materials costs.
“The combination of higher prices and increased interest rates are generating a notable slowing of the housing market,” says Robert Dietz, NAHB’s chief economist. “While the nation needs additional housing, home sales are slackening as tightening monetary policy continues to put upward pressure on mortgage rates and supply chain disruptions raise construction costs.”
On a year-to-date basis, new home sales only posted an increase in the Northeast last month with a 6.5% increase. New home sales were down on a year-to-date basis by 16.8% in the Midwest, 19.3% in the South, and by 0.6% in the West.