April 2024 New-Home Sales
What happened this month
New-home sales fell 4.7% in April, dropping from March’s downwardly revised level to 634,000 annual sales. New-home sales fell 7.7% annually as buyers faced high housing costs.
Mortgage rates climbed steadily through April and exceeded 7% for the first time since December 2023. Buyers felt the worsening affordability conditions and pulled back on home purchase activity.
The annual rate of new-home sales fell this month in the Northeast (-20.9%), the South (-4.8%), and the West (-7.3%), but picked up in the Midwest (+10.0%). On an annual basis, new-home sales were higher in only the Midwest (+27.5%) as well, but remained flat in the Northeast and fell in the South (-15.1%) and the West (-5.0%).
Affordable Midwest locales have gained popularity as the market has remained generally less affordable, which has likely driven new-home sale activity.
New homes are a more common option for home shoppers
New construction activity picked up in April, promising more new-home inventory ahead. However, after sideways movement in April, homebuilder sentiment fell for the first time in six months in May as builder optimism buckled under higher mortgage rates.
New-home inventory picked up 12.1% annually in April, mirroring the climb in overall inventory, which increased 30.4% in April. As inventory climbed and buyer activity pulled back, new-home inventory levels translated to 9.1 months’ supply, 21.3% (+1.6 months) higher than one year ago and 7.1% (+0.6 months) higher than the previous month.
But new homes are less likely to be move-in ready
Though for-sale inventory picked up in April, just 21% of available homes were completed. This continues the steady climb in share of completed new homes for sale, but remains below pre-pandemic levels.
More available new-home inventory, especially completed inventory, is good news for buyers, who are seeing both more move-in ready new homes and more existing homes than last year.
The new-home share of all inventory reached as high as 31.8% in 2022, and has generally remained in the 28% to 32% range since, well above the average 16% pre-pandemic (2019).
Builders have provided crucial inventory in an undersupplied market, and new-home inventory made up 28.1% of available inventory in April.
Builders heed affordability concerns and benefit from limited existing homes
The median sale price for a new home fell monthly to $433,500 in April, 1.4% lower than in March, but 3.9% higher than one year earlier. Roughly 44% of homes were sold for less than $400,000 in April, 2 percentage points lower than a year prior.
Existing-home sales fell in April as well, emphasizing how much higher mortgage rates sap buyers’ energy. However, the most recent inflation and employment data signaled that the economy is cooling, and mortgage rates have softened in response.
The rest of the year’s housing market will hinge on mortgage rate activity. Inventory is still low in a historical sense, but has picked up significantly, meaning buyers have lots of options and are likely eager to jump into the market if affordability improves.
In the meantime, renting continues to be an affordable option for would-be buyers, as rents fell for the ninth consecutive month in April.