April new home sales fell 11.4 percent from a strong March, to 569,000 units (SAAR), according to the U.S. Census Bureau. Sales of new homes were up 0.5 percent from a year ago. A dramatic decline in sales activity in the West largely drove the big monthly drop, accounting for roughly 2/3 of overall the national fall.
After soundly beating expectations in every month to start 2017, it’s not very surprising to see new home sales come back to Earth in April. Some may wring their hands over the double-digit monthly decline from March, but it’s important to keep all the numbers in context — data from the first three months of the year were all revised upward, and at a seasonally adjusted annual rate of 569,000, April new home sales were still higher than in all but four months of 2016. Additionally, a big monthly drop in sales activity in the West accounted for a large majority of the overall national decline, which could just be a monthly blip. The seasonally adjusted price of new homes nationwide fell, which is encouraging to budget-conscious buyers, but most of that drop was most likely driven by weakness in the West, where homes tend to skew towards the higher price points. Inventory of new homes was also up, which is great news, but the price must be right to cater to large numbers of millennial buyers entering the market to buy their first home. Overall, the new home sales market was bound to regress to the mean a bit sooner or later, and going forward, it wouldn’t surprise me to see these preliminary numbers revised upward in coming months as more data comes in.
