Sales of new homes plunged unexpectedly much more than economists expected – and for the fourth consecutive month – in April, data showed on Tuesday, adding to signs that the once-booming housing market may be due to a sudden reversal.
About 591,000 new single-family homes were sold last month on a seasonally adjusted annual basis, plunging 16.6% below March’s rate of 709,000 and falling sharply below analysts’ projections of 750,000, the Census Department reported tuesday.
“In short, the party is over,” Pantheon Macro chief economist Ian Shepherdson said in emailed comments after the report, noting that the sales slump follows a “strong downward trend.” fall in mortgage applications” as mortgage rates begin to rise on the heels of the Federal Reserve’s interest rate hikes that began in March.
The monthly payment required to buy a home has risen about 50% since September, with about two-thirds of the increase due to soaring rates, Shepherdson says; the medium 30-year fixed-rate mortgages climbed to 5.25% this month from 3% just a year ago.
Despite the collapse in sales, median prices hit a new all-time high of more than $450,000, reflecting pricing pressure that is dampening housing demand, LPL Financial chief economist Jeffrey Roach said. in a Tuesday note, warning that the housing market downturn would drag on. overall economic growth this quarter.
The data comes less than a week after the Commerce Department reported the annualized number of housing permits fell to a five-month low of 1.8 million in April, while housing starts recorded a worse than expected rate of 1.7 million, pointing to a steeper decline in the months to come, says Shepherdson.
A potential bright spot: prices should start to fall as demand continues to fall, says Comerica Bank’s Bill Adams, predicting price increases of around 20% from the end should fall to a low figure of here at the end of next year.
Despite recent signs of a slowdown, historically high savings rates and unprecedented government stimulus efforts have helped spark a home-buying frenzy during the pandemic. Median home sales the price was $346,900 last year, up 17% to the highest level on record, according to the National Association of Realtors. In addition to a cash-flooded economy, “chaotic” supply chains have also contributed to housing shortages and rising prices, according to Bank of America. “Builders got bogged down,” says Alexander Lin of Bank of America, pointing out that homes under construction last year exceeded the number of homes built for the first time in history, while the number of homes allowed but not started reached a record level.
The Fed embarked on its most aggressive cycle of interest rate hikes in two decades, hoping to dampen decades-high inflation while inevitably making a slew of debt offerings more expensive. , including future mortgages. “Market volatility and the uncertainties of the war have dampened rising mortgage rates,” says Greg McBride, chief financial analyst at Bankrate, warning that home equity lines of credit almost always come with variable rates that see drops. almost immediate increases, while fixed rates will begin to rise. for new mortgages.
Buying a home is becoming ‘unaffordable for most Americans’: Here’s what experts predict for the housing market in 2022 (Forbes)