Dive Brief:
- New single-family home sales rose 16.6% between March and April to an annual rate of 619,000, the Commerce Department reported Tuesday. April's rate was 23.8% above the pace of new home sales in April 2015.
- The median sales price of new homes sold in April was $321,100, up from $288,000 in March.
- The gain in new home sales last month was led by a whopping 52.8% rise in the Northeast. The West saw sales surge 18.8%, and the South saw a 15.8% bump. The Midwest was the only region with a drop in sales, experiencing a 4.8% slide.
Dive Insight:
New home sales, which represent about 10% of all home sales, demolished expectations, as economists surveyed by Bloomberg predicted only a 2.4% gain. Last month's sales rate was the highest since early 2008.
The major increase in new home sales "signals housing was returning to more stable footing," due largely due to low mortgage rates and a strengthening job market, Bloomberg noted.
The bump in sales coincides with economist predictions that 2016 will be housing's "best year in a decade." During a webinar last month, Len Kiefer, deputy chief economist at Freddie Mac, said low mortgage rates and strong buyer demand — especially due to demographic changes and aging millennials jumping into homeownership — will create a healthy market environment for builders.
However, tight inventory concerns continue to plague the market, as the rising median price of new homes reflects the extreme competition for available properties. Real estate groups have called on builders to ramp up construction of new homes, but homebuilders point to increasing regulatory costs as a major obstacle to adding more inventory.
Tuesday's strong new home sales results reinforce the positive string of housing reports this month. Builder confidence held steady at a score of 58, housing starts rose 6.6% to a 1.172 million annualized rate, and existing home sales inched up 1.7% in April.
