After the preceding month's better-than-expected numbers, the number of new home sales in the U.S. fell in April 2024. Worse, the estimated number of new home sales for January through March 2024 was revised downward.
Not uncoincidentally, the median and average sale prices recorded for new homes in those months was revised upward. The overall trend over the last several months however is flat.
This combination of factors mean the downward momentum for new home sales as reasserted itself. Our initial estimate of April 2024's market capitalization of the new home market is $27.24 billion, down about 4.4% since October 2023 and nearly 10% from its December 2020 pre-Biden era peak. After adjusting for inflation, the new home market's decline exceeds 23%.
The main culprit behind the continuing downward trend for the new home market is inflating mortgage rates, which have been rising and topped the 7.0% threshold in recent weeks. Mortgage rates rising faster than incomes reduce the relative affordability of new homes, putting them out of reach for a majority of U.S. households.
The following charts track the U.S. new home market capitalization, the number of new home sales, and their sale prices as measured by their time-shifted, trailing twelve month averages from January 1976 through April 2024.
Falling sales trend continues:
Flat trend for prices:
Here's how the effects of the run-up in mortgage rates on home sales is being reported:
The run-up in mortgage rates has sapped momentum from the housing market. The National Association of Realtors on Wednesday reported a drop in existing home sales in April, while government data last week showed single-family housing starts and building permits fell last month. Homebuilder confidence deteriorated considerably in May.
The median new house price increased 3.9% to $433,500 in April from a year ago. Most of the new homes sold last month were in the $300,000-$499,999 price range.
We'll take a closer look at how unaffordable new houses have become for the typical American household in the next week.
References
U.S. Census Bureau. New Residential Sales Historical Data. Houses Sold. [Excel Spreadsheet]. Accessed 23 May 2024.
U.S. Census Bureau. New Residential Sales Historical Data. Median and Average Sale Price of Houses Sold. [Excel Spreadsheet]. Accessed 23 May 2024.
Image credit: New Home Construction by Paul Brennan on PublicDomainPictures.net. Creative Commons CC0 1.0 DEED CC0 1.0 Universal.