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Why the Fall in April New Home Sales Isn’t a Reason to Worry

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New home sales slip in April

The United States Census Bureau and the Department of Housing and Urban Development report monthly data on the number of new homes sold in the United States. Trends in the number of new homes sold and changes in new home inventory give investors an idea of the demand for housing (REM) in the United States.

As per the explanatory notes on the Census Bureau’s website, it takes six months to establish a trend in new home (DHI) sales, and the latest data suggest no change in the upward trend of the new home sales (ITB) market.

As per the recent report, new single-family homes (XHB) sold in April were at a seasonally adjusted rate of 662,000 units, a fall of 1.5% from the revised March rate of 672,000 units. The annual rate, however, was up 11.6% compared to the April 2017 estimate of 593,000 units.

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Average price and inventory

The Census Bureau reported that the median sales price for new homes sold in April was $312,000 compared to $366,000 in March, and the average home price in April was $407,000 compared to $366,000 in March. The maximum number of homes (FTY) sold were in the price range of $200,000–$400,000.

Impact of rising rates on new homes

The threat of increasing rates on new home sales seems to be limited, as the year-over-year increase in sales remains at 11.6%. The fall in April new home sales could have been the result of a high percentage of under-construction inventory, while the percentage of completed inventory was at its lowest level since 1999.

Overall, the decline across housing market data in April isn’t a reason to worry, as the improving US economy and rising wages could lend the required support to the sector.

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