INSERT NEW HOME SALES CHART
“The new-home market had been a relative bright spot in housing, but a variety of factors have converged to sap its momentum,” said Odeta Kushi (pictured), deputy chief economist of First American. “The spring surge in mortgage rates has dampened demand, even amid falling new-home prices and an uptick in new-home inventory, which reached its highest point since 2008. The impact is clear in April’s new-home sales, which came in below expectations and the March data was revised downward as well.”
Mortgage rates spiked in April to their highest levels since November, reducing affordability for buyers. The average rate on a 30-year fixed mortgage topped 6.9% during the month, according to Freddie Mac data.
Sweetening the deal
While higher borrowing costs dealt a blow to sales, builders have been using incentives like price cuts and mortgage rate buy-downs to help offset the affordability crunch. The median sales price for new houses sold in April was $433,500, down 1.4% from March though still nearly 4% higher than a year ago.
“The reasons behind the moderation of new-home prices may be that builders continue to offer price cuts to entice buyers,” Kushi said. “The NAHB reported that in May, about 25% of builders said they reduced prices. The average price reduction was 6%.”
