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New Home Sales: Tight Supply And Higher Rates Start To Matter

May 25, 2021
Bottom Line:   New home sales slowed in April and were revised modestly lower for March.  After peaking in January, sales slowed as continued high prices and higher mortgage rates dampened affordability. Sales over the last three months have averaged 878k annualized units, down from the six- and twelve-month averages of 906k and the 2020 pace of 943k annualized units, suggesting a deceleration in the pace of gains.  Still, the pace of gains is well above that of 2019, 731k, and the 5-year average of 691k.   Home prices were sharply higher in April, as tight supply conditions left sellers with pricing power.  Overall, housing activity remains robust but is clearly cooling modestly as higher prices and higher mortgage rates take their toll on affordability.
New Home Sales FELL by 5.9% to 863k, after the prior month was revised lower to 917k. This compared with market expectations for a decline to 950k, from the unrevised March level of 1021k. 
Sales are now 48.3% ABOVE their year-ago level.
The Inventory of Homes Available for Sale
ROSE by 3.9% to 316k. Inventories are now 1.6% BELOW their year-ago.
Combined with the decline in sales, the Months' Supply increased to 4.4 months from 4.0 months. This is modestly BELOW a normal level of 6.0 months.
Home Prices
ROSE with median prices 20.1% ABOVE their year-ago level and with average prices 20.8% ABOVE their year-ago level.