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First Cut: Sales of new single-family homes in April eked out a small gain

Sales of new single-family homes were up 0.6% to 623,000 in April, a surprisingly strong reading in light of the deterioration in the labor market and uncertainties associated with the COVID-19 pandemic. However, sales were down 6.2% compared to 664,000 in April 2019.

Sales were up in three of four regions. The Northeast was up 8.7%, the Midwest and South were both up 2.4%, and the West was down 6.3%. It is possible that sales in the West were more affected by lack of new inventory in affordable price ranges. In any case, the level changes are small and not particularly significant.

The details of the report suggest that buyers of new homes in April were more interested in lower-priced units and perhaps were more willing to sign a contract on construction not yet started in hopes of locking in a cheaper mortgage rate now rather than risking higher prices and loan costs later.

Builders were far less confident about the market for new homes in April and cut back significantly on projects as soon as it was evident that supply was starting to increase and to avoid unwanted unsaleable inventories. The months’ supply of homes available for sale dipped slightly to 6.3 in April after rising to 6.4 in March.

The median price of a new home was down 5.2% in April from March to $309,900 and reflected a switch in the market to smaller homes. Compared to April 2019, the price was down 8.6%. The share of new homes sold in April rose to 47% for homes under $300,000 compared to 43% in March. Homes sold that were not yet started rose to 30% of the total from 24% in the prior month.

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