US new home sales drop by 6.9% despite low mortgage rates
New home sales in the US fell for the 14th straight month.
US new home sales dropped in April even though mortgage rates are low and US housing construction rose in April. The US Commerce Department reported that single-family homes sold at a seasonally adjusted annual rate of 673,000 units in April, plummeting from 723,000 in March.
Why did US new home sales fall in April?
US new home sales fell in April because of a decline in sales of homes worth less than $300,000. Those homes are usually purchased by first-time or middle-class homebuyers, but more affordable houses on the market caused new home sales to drop. New home sales fell most in southern, midwestern, and western US states.
Can US new home sales improve?
Though US new home sales declined, Lawrence Yun, the National Association of Realtors' chief economist, said that a strong job market should eventually cause an increase in new homeownership.
‘First, we are seeing historically low mortgage rates combined with a pent-up demand to buy, so buyers will look to take advantage of these conditions,’ said Yun.
‘Also, job creation is improving, causing wage growth to align with home price growth, which helps affordability and will help spur more home sales,’ added Yun.
Sam Khater, economist for mortgage loan company, Freddie Mac, also has an optimistic outlook about the US housing market. He wrote about the expectation of robust new home sales in the summer in a monthly report.
‘Our outlook for the housing market remains largely unchanged. We still expect stronger home sales and housing starts in the coming months due to favourable market conditions and accelerating wage growth,’ wrote Khater.
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