New home sales dropped for the fourth straight month in April, offering up another sign that the housing market is starting to slow.
The volume of new single‐family home sale fell to a seasonally adjusted annual rate of 591,000 last month, according to the Census Bureau and the Department of Housing and Urban Development, down 16.6% from the March rate and 26.9% lower than the rate a year ago.
The figure also missed the consensus outlook of 750,000 units from Econoday, while March was also revised down to 709,000 from 763,000.
The miss in sales adds to a host of other recent metrics showing the once-blistering hot housing market is starting to cool as many homebuyers are priced out by mortgage rates that remain at 13-year highs.
“While new construction gained favor with many would-be buyers over the past two years due to the extreme shortage of existing homes for sale, the rising cost of a new home is now pricing many people out of the market,” George Ratiu, senior economist and manager of economic research at Realtor.com, said in a statement.
The median price of a new home jumped to $450,600, 20% higher compared with last year. That pushed the monthly mortgage payment $720 higher, a 57% increase at today’s average mortgage rate, according to Ratiu.
That is hitting first-time buyers hardest.
Sales of entry-level homes — those price below $300,000 — made up less than 20% of April’s new home sales, compared with 38% in 2020, according to Ratiu.
The new home sales figures echo data released last week from the Mortgage Bankers Association (MBA) that showed the volume of mortgage applications for new home purchases dropped 10.6% in April versus a year ago and was down 14% from March.
That confirms consumers' concern that it’s a ‘bad time to buy a home,’ according to the most recent Home Purchase Sentiment Index® (HPSI) from Fannie Mae.
Homebuilders are similarly gloomy. Builder confidence in the new home market fell in May for the fifth straight month and notched the lowest reading since June 2020, according to the National Association of Home Builders (NAHB)/Wells Fargo Housing Market Index (HMI).
One of the biggest factors behind the pessimism is suddenly higher mortgage rates.
The rate on the 30-year fixed mortgage — the most common home purchase loan — was 5.25% last week, slightly lower than the 5.3% the prior one, but still 2 percentage points higher since the start of the year, according to Freddie Mac.
That — plus increasing home prices — have added about $750 more to the monthly payment on a median home for sale since the start of the year, according to Redfin data.
As a result, bidding wars are down, sellers are reducing listing prices, and buyers — who are also dealing with inflation levels not seen in 40 years — are exiting the market.
“The market for new homes is mirroring broader real estate trends, as rising inflation is taking a bigger chunk out of Americans’ paychecks and surging borrowing costs are compressing homebuyers’ budgets,” Ratiu said. “With affordability on a steep decline, new homes have become a luxury for trade-up buyers with significant equity.”
Ronda is a personal finance senior reporter for Yahoo Money and attorney with experience in law, insurance, education, and government. Follow her on Twitter @writesronda