New-home sales fall back in April

Dive Brief:

Following a robust March, new-home sales dropped 11.4% in April to a rate of 569,000, the Commerce Department reported Tuesday. Sales are still ahead 0.5% year-over-year.
April's figures came in well below analyst expectations of a rate of 610,000 new home sales, according to MarketWatch.
The median sales price of new homes sold in April was $309,200, down from March’s upward-revised $318,700. There were 268,000 new homes for sale at the end of April — a 5.7-month supply — up from 4.9 months in March.

Dive Insight:

April’s wearker-than-anticipated new-home sales report follows a strong March, which was the best month for new-home sales since July 2016. One driver of that growth was a mild winter that allowed crews to get to work sooner putting up new homes to address continued demand.

Whether that growth trend will continue, and how robust it might be, is to be determined. Single-family housing starts ticked up slightly in April and were ahead 8.9% year-over-year. But permits for both single- and multifamily housing dipped in April, although they were up 5.7% from a year earlier. Meanwhile, a net 900-position increase in residential construction employment indicates that builders are readying for more new construction activity ahead.

The persisting inventory shortage is one driver of new-construction activity, as new homes are needed to boost housing stock to levels that can keep pace with demand and help take the pressure off price growth. While builder confidence in the market for new single-family construction dipped in April, according to the National Association of Home Builders/Wells Fargo Housing Market Index, the figure bounced back in May. Sales expectations for the next six months and current sales conditions also increased in May as homebuilders eye opportunities for new-home construction even as the availability of lots and skilled labor remain tight.

Rising mortgage rates and surging home prices could stand to dampen demand for new housing as the costs associated with owning a home move further out of reach for many prospective buyers. The latest CoreLogic Home Price Index projects growth to approach 5% through March 2018, with the index forecast to reach its previous record high in the latter half of this year.