New-home sales in the United States rose last month even though home prices increased during this period, with easing mortgage rates possibly boosting buying activity.
Many existing homeowners are also hesitant to sell their properties because that could mean they will have to take on a new mortgage for a new home with a higher interest rate. Prospective homebuyers are therefore likely to have shifted their attention to the new-home market.
Region-wise, the Northeast saw the biggest jump, with new single-family home sales surging by 170.8 percent month over month. The West registered a sales increase of 29.8 percent, the Midwest 6 percent, and the South saw sales drop by 5.4 percent during this period.
Slowing Price Growth
An April 25 report by S&P Dow Jones Indices (S&P DJI) revealed that home price growth eased down in February on a monthly basis.The National Home Price NSA Index, covering all nine U.S. census divisions, only rose by 2 percent annually in February 2023, down from the 3.7 percent gain a month back. The 20-City Composite rose by just 0.4 percent, less than the 2.6 percent gain in January.
All 20 cities in the composite registered lower prices in the year ended February 2023 compared to the year ended January 2023.
Craig J. Lazzara, managing director at S&P DJI, pointed out that the data pre-dates the disruptions faced by the commercial banking industry in March. He believes housing prices might struggle to rise in the short term.
“Although forecasts are mixed, so far the Federal Reserve seems focused on its inflation-reduction targets, which suggests that interest rates may remain elevated, at least in the near term,” he said.
Elevated Housing Costs
An April 20 report by real estate brokerage Redfin points out that homebuyers are “backing off” from the housing market, mainly due to elevated housing costs.Data from the National Association of Realtors shows that the monthly principal and interest payment for a home was $1,827 in February 2023, up 32 percent from $1,384 a year back. However, median family income only rose 6 percent during this period.
“Homebuyers are window shopping, and many are entering the store, but few of them are making it to the cash register yet,” said Redfin deputy chief economist Taylor Marr. “There’s not much on the shelves to choose from, and high mortgage rates and still-high prices are making homes too expensive for many buyers.”
“Some buyers are discouraged by mortgage rates rising this week, which is partly due to stronger-than-expected bank earnings making it more likely the Fed will hike interest rates next month.”
The 30-year fixed-rate mortgage averaged 6.39 percent for the week ended April 19, up from 5.11 percent a year back.