The U.S. housing market felt the sting of elevated mortgage rates in April, as sales of new single-family homes took a significant hit.
According to a report from the Commerce Department released Thursday, new home sales declined by 4.7 percent from March, reaching a seasonally adjusted annual rate of 634,000. The figure for March was also revised downward to 665,000.
Economists surveyed by The Wall Street Journal had anticipated a stronger performance, with an expected rate of 677,000 for April.
The actual numbers underscore the impact of high borrowing costs on buyer activity, as potential homeowners find themselves increasingly priced out of the market.
It’s worth noting that monthly new home sales data can be quite volatile and are frequently subject to revision.
On a year-over-year basis, the picture looks even bleaker. Adjusted for seasonal variations, new home sales were down 7.7 percent compared to April 2023. This decline reflects the broader challenges facing the housing sector, where affordability issues continue to dampen demand despite a resilient economy.
On Wednesday, the National Association of Realtors said sales of existing homes fell 1.9 percent in April compared with the previous month, also below expectations. Compared with a year ago, existing home sales were down the same 1.9 percent.
As the Federal Reserve maintains its tight monetary policy to combat inflation, homebuyers are left grappling with higher financing costs, leading to subdued activity in the new home market. The latest figures underscore the ongoing struggle to balance economic growth with inflation control, as the housing sector remains a key barometer of consumer confidence and financial health. Mortgage rates have risen in recent months as incoming data showing a rise in inflation and comments by Fed officials have indicated that the central bank will not be cutting interest rates as early as anticipated.
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