Sales of new U.S. homes fell in April by the most in nearly nine years, dented by the combination of higher prices and rising mortgage rates.
Purchases of new single-family homes decreased 16.6% to an annualized 591,000 pace, the weakest since April 2020, government data showed Tuesday. The figure fell well short of all estimates in a Bloomberg survey of economists, which called for a 749,000 rate.
Home ownership has become a challenge for many Americans, as a run-up in mortgage rates collides with record prices. The average rate on a 30-year mortgage was 5.25% last week, up from around 3% at the end of 2021, Freddie Mac data show.
"April's dismal new-home sales data shows an industry besieged by higher construction costs, supply chain disruptions and by higher mortgage rates that are giving many potential buyers cold feet," said Robert Frick, corporate economist at Navy Federal Credit Union.
Homebuilder shares tumbled after the report, with an S&P gauge that includes DR Horton Inc. and Lennar Corp. falling 4.3%.
A separate report last week showed that a measure of homebuilder sentiment fell in May for a fifth straight month amid concerns over rising construction costs and a slowdown in demand.
The new-home sales report, produced by the Census Bureau and the Department of Housing and Urban Development, showed that the median sales price of a new home rose 19.6% from a year earlier to a record $450,600.
There were 444,000 new homes for sale as of the end of the month, the most since 2008. However, nearly all had yet to be completed.
At the current sales pace, it would take nine months to exhaust the supply of new homes. That compares with 6.9 months in the prior month and 4.7 months one year ago.
The number of homes sold in April and awaiting the start of construction -- a measure of backlogs -- rose slightly to 185,000 from a month earlier, Tuesday's report showed.
Sales declined in all four U.S. regions, including by double digits in three. Purchases sank by 19.8% in the South, the largest region, and by 15.1% in the West.
New-home purchases account for about 10% of the market and are calculated when contracts are signed. They are considered a timelier barometer than purchases of previously owned homes, which are calculated when contracts close.
Sales of previously owned homes fell in April to the lowest level since June 2020 amid growing affordability challenges.
The new-homes data are volatile; the report showed 90% confidence that the change in sales ranged from declines of 27% to 6.2%.