Photo: James Bombales
April was supposed to be a disastrous month for new home sales. Economists had predicted a 21.9 percent decline in sales of newly-built single-family homes in what was the first full month of lockdown for many parts of the country.
Defying the odds, new home sales increased 0.6 percent month-over-month to a seasonally adjusted annual rate of 623,000 units, according to data released today by the US Census Bureau and the Department of Housing and Urban Development.
“The latest rise was in line with recent improvements in mortgage applications, but given virus-related restrictions, it was still well above market expectations,” wrote Capital Economics’ Chief Property Economist, Andrew Burrell, in response to the report.
Compared to the same period last year, new home sales were down 6.2 percent, but it was nevertheless a marked improvement over March’s 15.4 percent drop, which was the poorest monthly performance since 2013.
New home sales plunged 17 percent in the West and 7 percent in the Midwest. Somewhat surprisingly, the Northeast recorded a 39 percent boost in sales, while the South saw a marginal 1 percent increase.
Nationwide, the median sale price of a new single-family home dipped to $309,900 in April, falling 3.6 percent from $321,400 in March. Research firm Oxford Economics attributed this to the widespread use of builder incentives, which may have persuaded home shoppers to buy despite the economic uncertainty.
At the end of April, there were an estimated 325,000 new homes on the market, equating to 6.3 months of supply — a level that is generally regarded as healthy.
While the new residential sales statistics for April were far better than expected, Capital Economics didn’t mince words when predicting how the rest of 2020 would pan out.
“On the one hand, with the country starting to ease restrictions, pent-up demand may support activity over the coming months. But on the other hand, the ongoing weight of record unemployment levels will limit any upside. We expect new home sales to end the year well down on last year,” said Burrell.