April New Home Sales Falter Following Strong First Quarter

New single-family home sales took a tumble in April after a strong first quarter showing, HUD and the Census Bureau reported yesterday.

The report said sales of new single-family houses in April came in at a seasonally adjusted annual rate of 569,000, down by 11.4 percent from March’s revised 642,000 but 0.5 percent higher than a year ago (566,000).

Sales slumped in every region. In the South, sales fell by 4.0 percent to 333,000 units in April from 347,000 in March but improved by 4.1 percent from a year ago. In the West, sales plunged by 26.3 percent to 126,000 units in April from 171,000 in March but improved by 11.2 percent from a year ago.

In the Northeast, sales fell by 7.5 percent in April to 37,000 units from 40,000 in March and fell by 5.1 percent from a year ago. In the Midwest, sales fell by 13.1 percent in April to 73,000 units from 84,000 in March but improved by nearly 20 percent from a year ago.

The median sales price of new houses sold in April fell to $309,200; the average sales price fell to $368,300. The seasonally adjusted estimate of new houses for sale at the end of April rose to 268,000, representing a supply of 5.7 months at the current sales rate, up from 4.9 months in March; however, the improvement came almost entirely on the drop in sales, as the number of completed homes available for sale was unchanged at 59,000.

Mark Vitner, senior economist with Wells Fargo Securities, Charlotte, N.C., said even with the April slump–caused in part by an upward revision of data from the prior three months–sales remain up solidly on a year-to-date basis and homebuilders continue to report strong demand.

“April’s decline was largely due to seasonal influences,” Vitner said. “Warmer than usual weather pulled the spring selling season forward into the first quarter, particularly in the Northeast and Midwest. Sales were revised significantly higher for each of the three previous months and remain comfortably above their year-ago pace.”

Vitner added on a year-to-date basis through April, new home sales are running 11.3 percent ahead of the first four months of 2016 and home builders remain optimistic. “Moreover, new home sales have been stronger than their year-ago level every month this year, including April following its big drop,” he said.

Ralph McLaughlin, chief economist with Trulia, San Francisco, agreed, noting that at the less volatile 12-month rolling total, new home sales looked solid in April, growing year-over-year by 13.7 percent and inching up to 88.3 percent of the 50-year average.

“How many new home sales do we need for the market to look normal?,” McLaughlin said. “If we compare the share of new home sales to total sales, that share needs to more than double. In April, new home sales made up about 11.9 percent of all home sales, which is less than half of the historical average of 23.6 percent. While it’s been tough for homebuyers to buoy existing home sales because of low inventory, it looks like there is much potential for new homes sales to run higher.”