Sales of newly constructed homes fell more than expected in April, posting the largest drop in more than two years, though some economists see the decline as a temporary correction.
The Commerce Department said Tuesday that new home sales skidded 11.4% last month to a seasonally adjusted annual rate of 569,000. Economists had expected a decline to 610,000 after March sales of 642,000, which were the highest since October 2007.
The drop in April — the largest since March 2015 — was led by a 26.3% plunge in the West, the biggest decline in that region since October 2010.
But last month’s sales were still up 0.5% from a year earlier and economists see underlying strength in the housing market, with Ian Shepherdson of Pantheon Macroeconomics called the April drop “a correction from the March cycle high, not a warning sign.”
“We expect sales to rebound somewhat in May, and to return to the March high, at least, over the next few months,” he told the Los Angeles Times.
As Reuters reports, “Shrinking labor market slack, marked by a 4.4 percent unemployment rate, is improving employment opportunities for young Americans, helping to underpin demand for housing.” The housing market is also being supported by historically low mortgage rates.
“The government’s new-home sales data are based on small samples and are often heavily revised,” MarketWatch said, noting that total sales in the first four months of the year are 11% higher compared with the same period a year ago.
Rainy weather in April may have helped dent sales but Ralph McLaughlin, Trulia chief economist, said builders still have a way to go before residential construction normalizes.
“If we compare the share of new home sales to total sales, that share needs to more than double,” he wrote in a Tuesday note. New-home sales made up nearly 12% of total sales, about half the historical average, he said.
The median sales price for a new home was $309,200 in April, down from $318,700 in March and $321,300 in the year-ago period.