New home sales in April fell 1.5% from March. April saw 662,000 new homes sold, whereas March saw 672,000, according to estimates from the U.S. Census Bureau and the Department of Housing and Urban Development. The industry seems relatively unconcerned with the slip and calls for an upward trend in home sales going forward.
“[The National Association of Home Builders] index is still down a bit since year end, but there is no sign of ongoing weakening,” Jim O’Sullivan, chief U.S. economist at High Frequency Economics, said in a note to clients, according to the Wall Street Journal.
“The pattern suggests some loss of momentum, but probably in the form of slower growth rather than contraction,” he added.
Zillow Senior Economist Aaron Terrazas is also unconcerned, and feels that it would have been a once-in-a-blue-moon occurrence had the sales risen for the fourth month in a row.
“April’s slight monthly decline in new home sales was actually smaller than expected and doesn’t represent much of a deviation from the general strength we’ve seen in the new home market to start 2018. Sales remain up strongly over the past year, and a fourth monthly increase in a row to start the year would have been very rare: In the 659 months that have passed between May 1963 and today, monthly new home sales have risen in four consecutive months just 4% of the time. So, despite the blip, the trends we’ve been observing for several months still very much hold,” he said in a statement.
Terrazas sees a strong economy and favorable demographics as reason for continued optimism despite the slight correction in home sales last month.
As opposed to new home sales, home prices are on the rise. For April, the median sale price for the homes sold in April was $312,400. The average sales price $407,300. Terrazas says this is largely the result of higher construction wages and rising construction prices.
“In order to maintain their margins, builders have little choice but to pass these costs on to buyers, reflected in the high – and rising – price of new homes. Thus far in 2018, consumers have largely been willing and able to pay these prices to secure a new home. Whether or not they will continue to is an open question,” Terrazas said in a statement.
If buyers are not discouraged by the rising prices and they maintain the current rate of sales, the U.S. Census and HUD report says current inventory of homes for sale will last for 5.4 months as there are roughly 300,000 homes available for sale, which is a nine-year high.
“While inventory remains tight in all housing markets across the country, the number of new homes for sale inched up by 2,000 homes to 300,000, hitting the highest level in nine years. At the same time, the typical new home has been for sale 3.8 months since completion which is a stark contrast to the existing home market, where the typical home was on market for only 59 days—less than two months—in April according to realtor.com data. This differential is partially a reflection of the higher price point of new home sales where the median price has reached $312,400, meaning that half of new homes sold above this price,” Realtor.com Chief Economist Danielle Hale said in a statement.