April New Home Sales: Back to Earth
The 11.4 percent drop was the biggest month-over-month drop in new home sales since March 2015, and the first time this year that sales have undershot forecasts.
- April new home sales plunged 11.4 percent from March to 569,000 units (SAAR), according to the Census Bureau.
- The drop was driven by sharp upward revisions to March new home sales, and a surprisingly large drop in new home sales in the Western United States.
- The number of new homes on the market increased by 4,000 units, about 1.5 percent, to 268,000 units (SAAR), but the increase was driven entirely by downward revisions to March inventory.
- The median seasonally adjusted price of new homes sold in April fell 3.2 percent from March to $306,200, in line with levels seen during the second half of 2016.
New home sales fell short of expectations, falling 11.4 percent in April to 569,000 units at a seasonally adjusted annual rate (SAAR), according to the U.S. Census Bureau. It was the biggest month-over-month drop in new home sales since March 2015 and the first time this year that sales have undershot forecasts. Over the year, new home sales remain up 0.5 percent.
Two factors explain the lion’s share of the large drop in new home sales reported in April.
First, new home sales for the prior three months were revised upward by a combined 55,000 units. March sales were revised upward by 21,000 units to 642,000 units (SAAR). Upward revisions to March new home sales explain about one-quarter of the large month-over-month drop reported in April.
Second, the Western region reported a surprisingly large drop in new home sales in April – falling 26.3 percent over the month to 126,000 units, its lowest level since October 2015. By contrast, sales in the South fell 4 percent and sales in the Midwest fell 13.1 percent from March. The sharp drop in the West explains about two-thirds of the month-over-month decline in nationwide new home sales, and excluding the West, new home sales fell by 5.9 percent in April. Excluding the West, new home sales are up 5.5 percent over the year. Given substantial uncertainty in initially reported new home sales estimates, we would not be surprised to see April new home sales estimates for the West revised upward in the coming months.
The number of new homes on the market increased 1.5 percent from March to 268,000 units (SAAR), its highest level since July 2009 (similar to last month) but still low by historic standards. However, all of the increase was driven by downward revisions to March estimates of the number of new homes on the market, which were revised downward by 4,000 units to 264,000 units (SAAR). Absent the downward revisions to March data, the number of new homes on the market would have been flat for the month.
The median seasonally adjusted price of new homes sold in April jumped 3.2 percent from March to $306,200, in line with median sales prices reported during the second half of 2016. The median price of new homes sold in April was 3.8 percent higher than a year ago. The median sale price should be interpreted with caution since it is driven by the regional mix of new homes sold. Since new homes in the West tend to be particularly pricey, the sharp drop in new home sales in the West likely drove some of the nationwide decline in median sale price.
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