U.S. new home sales hit two-year low; prices surge

div classBodysc17zpet90 cdBBJodivpBy Lucia Mutikanip

pWASHINGTON Reuters – Sales of new U.S. singlefamily homes tumbled to a twoyear low in April likely as higher mortgage rates and soaring prices squeezed firsttime buyers and those in search of entrylevel properties out of the housing market.pdivdivdiv classBodysc17zpet90 cdBBJodiv

pNew home sales plunged 16.6 to a seasonally adjusted annual rate of 591,000 units last month, the lowest level since April 2020, the Commerce Department said on Tuesday. Marchs sales pace was revised down to 709,000 units from the previously reported 763,000 units. p

pSales have now declined for four straight months. New home sales dropped 5.9 in the Northeast and tumbled 15.1 in the Midwest. They plummeted 19.8 in the densely populated South and decreased 13.8 in the Midwest. p

pEconomists polled by Reuters had forecast new home sales, which account for a small share of U.S. home sales, would fall to a rate of 750,000 units. Sales dropped 26.9 on a yearonyear basis in April. They peaked at a rate of 993,000 units in January 2021, which was the highest level since the end of 2006.p

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ppGraphic: New home sales – https:graphics.reuters.comUSASTOCKSxmvjoxblgprnhs.pngp

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pThe housing market is the segment of the economy most sensitive to interest rates, and new home sales are a leading indicator for the sector as they are counted at the signing of a contract. p

pThe 30year fixedrate mortgage jumped above 5 in April for the first time since February 2011, according to data from mortgage finance agency Freddie Mac. It has surged, averaging 5.25 in the week ending May 19, as the Federal Reserve raises interest rates to cool domestic demand and lower high inflation. p

pData last week showed sales of previously owned homes dropped to a twoyear low in April, while singlefamily building permits were the lowest since last October. Singlefamily homebuilder confidence was near a twoyear low in May. p

pDespite signs that demand for housing is slowing, a record shortage of homes will likely limit the decline in sales. The moderation in sales gains could allow supply to increase and slow doubledigit price growth. p

pThe median new house price in April soared 19.6 from a year ago to 450,600. Nearly all the houses sold last month were above the 200,000 price level. There were 444,000 new homes on the market at the end of April, up from 410,000 units in March. Houses under construction made up roughly 65 of the inventory, with homes yet to be built accounting for about 27.p

pThe backlog of homes approved for construction but yet to be started is at an alltime high as builders struggle with shortages and higher prices for inputs like lumber for framing, as well as cabinets, garage doors, countertops and appliances.p

pAt Aprils sales pace it would take 9.0 months to clear the supply of houses on the market, up from 6.9 months in March.p

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pp Reporting by Lucia Mutikani Editing by Chizu Nomiyama and Paul Simaop

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