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New Home Sales Retreat

New Home Sales Retreat

Michael Jensen, Mortgage and Finance Guru
, Mortgage and Finance Guru

In our effort to cover important trends that affect the mortgage market, FREEandCLEAR keeps a close eye on new home sales, which is the number of newly constructed housing units that are sold in a month.  The new home sales figure is reported separately from the existing home sales figure, which is the number of previously constructed homes that are sold in a month.  The new home sales market is smaller than the existing home sales market but it is still an important indicator for the real estate and mortgage markets.  In addition to reporting the number of housing units sold, the new home sales report also includes information on the supply of units for sale as wells as the median and average new home sales price.  The new home sales report, issued on a monthly basis, includes statistics for the prior month.

Breaking a streak of three consecutive months of positive reports, the new home sales report for April showed that new home sales declined 11.4% in March to 481,000 annualized units, as compared to 543,000 annualized units in February.  The March new home sales figure fell at the bottom end of industry analyst expectations and follows a disappointing April housing starts report to show weakness in the home builder market.  The drop in demand for new homes impacted prices with the March median new home sales price decreasing 1.5% to $277,400.  Driven by the drop in sales and a 4,000 unit increase in inventory, supply as compared to monthly sales increased to 5.3 months in March as compared to 4.6 months in February.  The largest housing region, the South, showed the most weakness, with sales off 15.8%.  The Northeast and West regions also showed declines with the Midwest region being the sole bright spot, with sales increasing 5.9% on the month.  The weak new home sales report is in stark contrast to the strong April existing home sales report which saw a significant jump in activity.  (Source: Bloomberg)

What it Means for Mortgage Borrowers

Although the April new home sales report is disappointing, it is important to highlight that the new home sales market is significantly smaller than the existing home sales market.  Additionally, strong March gains in existing home sales suggest that buyers continue to be active in the real estate market and are able to obtain mortgages to finance their home purchases.  The median new home sales price is approximately 25% higher than the median existing home sales price so buyers could be gravitating toward lower priced properties, at least for March.  Although new home supply increased in March, supply relative to sales remains relatively low and FREEandCLEAR expects home builders to continue to bring new inventory to market.  With low interest rates, increased supply and flat-to-declining home prices, now may be a good time for potential home buyers to look at new homes.  Use the Mortgage Qualification Calculator on FREEandCLEAR to determine what size mortgage you can afford and check out our new and improved Mortgage Process Guide to walk you through the mortgage process step-by-step.

The FREEandCLEAR Mortgage Expert

www.freeandclear.com

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About the author

Michael Jensen, Mortgage and Finance Guru

Michael is the co-founder of FREEandCLEAR. Michael possesses extensive knowledge about mortgages and finance and has been writing about mortgages for nearly a decade. His work has been featured in leading national and industry publications. More about Michael

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