In a sign that higher interest rates are lowering buyer demand, sales of new homes in April posted their biggest decline in nine years, according to The Wall Street Journal (subscription).
What’s going on: Sales of new homes dipped 16.6% in April from March, the Commerce Department said Tuesday. That’s the lowest level since April 2020 and far more extreme than the 1.7% decline expected by Journal-surveyed economists.
Why it’s important: “Rising mortgage-interest rates have made homeownership more expensive for buyers. The average rate on a 30-year fixed-rate mortgage was 5.25% last week, up from 3.1% at the start of the year, according to Freddie Mac.”
- First-time homebuyers, who represent the largest purchaser group, are “moving to the sidelines,” Whelan Advisory Chief Executive Margaret Whelan told the Journal.
Affordability ahead? In areas with ample supplies of new homes, including parts of Texas, prospective buyers may soon find houses in their price range.
- “Once the builders have a lot of finished unsold homes, and probably before then, they’re going to start discounting,” said John Burns Real Estate Consulting CEO John Burns.