New home sales declined in April as the housing market felt the impact of rising mortgage rates, which have recently edged even higher.
New home sales fell by 4.7% from March to an annual rate of 634,000, as per a Thursday report from the Census Bureau. The number of new home sales is 7.7% lower than it was in April of last year.
The median sales price for a new home was $433,500 in April.
This week, the average rate on a 30-year fixed-rate mortgage was over 7%, according to Mortgage News Daily, which tracks daily rate changes. That is down from a recent peak of above 8%, but still significantly higher than in the years preceding the pandemic.
The past few years have introduced a unique dynamic in the housing market due to higher mortgage rates. Many people are holding on to their existing homes and are waiting to sell until mortgage rates decrease, resulting in a shortage of existing homes for sale.
At the height of the pandemic, the Federal Reserve cut its interest rate target to near zero, causing mortgage rates to plummet to very low levels. In early 2021, individuals were securing 2.5% mortgages — the lowest level in modern postwar history.
The low rates spurred a surge in homebuying and investment, leading to an increase in home construction. However, this dynamic quickly began to shift when inflation rose, prompting the Fed to hike interest rates in response, thereby pushing mortgage rates to the highest levels seen since the turn of the century.
Existing home sales in April slowed by 1.9% to a seasonally adjusted annual rate of 4.14 million, reported the National Association of Realtors on Wednesday. The pace of existing home sales is nearly 2% lower than the year before.
In a bright spot for the housing market, housing starts—representing the change in the number of new residential buildings that began construction—rose by 5.7% from March to this past month. They are now at a seasonally adjusted annual rate of 1.44 million. Compared to April 2023, they fell by 2%.
