Sales of New Homes Plummet As Prices and Mortgage Rates Soar
May 24, 2022
Sales of newly built homes in April fell to the lowest level since the beginning of the pandemic as soaring prices and spiking mortgage rates weighed on buyer demand.
April’s sales dropped 16.6% from March and were 26.9% lower than in April 2021. The annualized, seasonally adjusted pace of sales came in at 591,000 units, far below analyst expectations of 750,000. That marks the slowest sales pace since April 2020, when the Covid pandemic began.
Mortgage rates have been steadily climbing since the start of the year but began to spike in April. The average rate for a 30-year fixed loan at the beginning of the month stood at 4.88%. By the end of April, it had risen to 5.41%.
Consumers, facing not only surging interest rates but the highest inflation in four decades, are having a hard time affording homes at current prices. Despite the slowdown in sales activity, the median price of a new home sold in April was $450,6000, an increase of nearly 20% from the year prior.
Sales of existing homes also slowed in April, declining nearly 6% on an annual basis.
Robert Dietz, the chief economist for the National Association of Home Builders called the plummeting sales “a clear recession warning for the overall economy for the quarters ahead.”