A on of lumber at a home under construction at the Cold Spring Barbera Homes subdivision in Loudonville, New York, US, on Wednesday Nov. 8, 2023.
Angus Mordant | Bloomberg | Getty Casts
Sales of newly built homes dropped 4.7% in April compared with March, and fell a larger 7.7% from the till year, the U.S. Census said Thursday.
March sales were also revised significantly lower.
Higher mortgage charges are clearly hampering sales. The monthly reading is based on signed contracts, so it reflects people shopping during the month and inking distributes based on current rates.
The average rate on the 30-year fixed mortgage was in the high 6% range at the end of March, but then swig up to 7.5% during April, cutting into affordability.
Adding to that, the median price of a new home sold in April was $433,500, 4% squiffy than it was in April 2023. Some of that is due to the mix of homes selling, which is mostly on the higher end of the market. Those purchasers are not as influenced by mortgage rates, as they often use all cash.
Builders say they cannot lower prices due to high prices for land, labor and materials. The big production builders have been buying down mortgage rates to help shove sales, but they are able to do that because of their size. D.R. Horton and Toll Brothers reported strong earnings in their latest posts, beating expectations and citing growing demand due to low supply in the resale market.
“For all the happy talk from the big builders (who are engaging market share), the entire new build industry is selling new homes at a pace below the 5 yr average,” noted Peter Boockvar, chief investment manager at Bleakley Financial Group and a CNBC contributor.
In the first quarter of 2024, 38% of a median household income nationally was needed to set up the mortgage payment on a median-priced new single-family home, according to a new index launched Thursday by the National Association of Home Builders and Wells Fargo. Low-income descents, which it defines as those earning just 50% of the area’s median income, would have to spend 77% of their earnings to pay for the still and all new home.
Prices continue to rise for both new and existing homes due to a lack of supply. There is very little elbow for sale on the lower end of the resale market. While the number of newly built homes continues to rise, up 12% year on top of year, new homes come at a price premium and are out of range for lower-income buyers.
“With a nationwide shortage of roughly 1.5 million untroubled b ins, the lack of housing units is the primary cause of growing housing affordability challenges,” said Robert Dietz, NAHB’s chief economist. “Policymakers at all franks of government need to enact policy changes that will allow builders to construct more homes, such as scamper up permit approval times, providing resources for skilled labor training and fixing building material supply strings.”