New Home Sales: Sharply Lower As Lower-End Buyer Priced Out

Bottom Line:  New home sales fell sharply more than expected in Maya and were revised lower for April.  Median sales prices were higher for the second month in a row as the composition of sales skewed towards more expensive homes.  As we saw in existing home sales, it appears that the lower-end buyer has been priced out of the market amid higher mortgage rates and higher prices.   On a trend basis, the level of new home sales remains robust, but the pace of gains has slowed notably with the three-month average at 824k units, well below the 12-month average of 902k, and the 2020 pace of 943k.  Looking forward, affordability will remain a big issue, with mortgage rates still hovering above 3%.  Housing likely remained an important driver of growth in the 2nd Quarter, but the housing tailwind for the economy will be slowing in the 2nd half of 2021.New Home Sales FELL by 5.9% to 769k, after the prior month was revised lower to 817k. This compared with market expectations for an increase to 865k, from the unrevised April level of 863k.
 
Sales are now 9.2% ABOVE their year-ago level.
             
The Inventory of Homes Available for Sale ROSE by 4.8% to 330k. Inventories are now 5.8% ABOVE their year-ago.
                         
Combined with the decline in sales, the Months' Supply increased to 5.1 months from 4.6 months. This is modestly BELOW a normal level of 6.0 months.Home Prices ROSE with median prices 18.1% ABOVE their year-ago level and with average prices 16.8% ABOVE their year-ago level.