New-home sales decline as demand falls in West

U.S. purchases of new homes fell in April, reflecting a setback in the western part of the country and indicating rising borrowing costs and property prices may limit the market’s progress, according to government data released Wednesday.

Highlights of New-Home Sales (April)

• Single-family home sales declined 1.5% m/m to 662k annualized pace (est. 680k) after downwardly revised 672k rate (prev. 694k)
• Median sales price increased 0.4% y/y to $312,400
• Supply of homes at current sales rate at 5.4 months in April versus 5.3 months in March
• Report incorporates revisions to seasonally adjusted new-home sales data back to January 2013

Key Takeaways
Mortgage rates at a seven-year high and elevated home prices may be prompting at least some potential buyers to hold off. A tempering of demand at a time when costs of construction supplies are surging would represent an additional challenge for the homebuilding industry. So far, though, the pace of sales remains firm.

Sales fell only in the U.S. West, which posted a 7.9 percent decline in April. Purchases were unchanged in the Midwest and up marginally in the South, the biggest region. Cooler demand could allow homebuilders to chip away at their backlogs.

The number of properties sold but not yet started increased in April to a five-month high, a sign that developers will stay busy in the coming months, the Commerce Department data showed.

New-home sales, tabulated when contracts get signed, account for about 10 percent of the market. They’re considered a timelier barometer than purchases of previously owned homes, which are calculated when contracts close and are reported by the National Association of Realtors.

Data released tomorrow is expected to show that transactions of existing of homes were little changed in April at a 5.55 million annualized rate after a 5.6 million pace the prior month.

Other Details

• Purchases decreased to a 176,000 annual rate in the West; rose 0.3 percent in the South to a 355,000 pace
• February home sales revised down to 659,000 rate from previously reported 667,000
• Report released jointly by the Census Bureau and Department of Housing and Urban Development in Washington

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