US new home sales drop by 6.9% despite low mortgage rates
New home sales in the US fell for the 14th straight month.
US new home sales dropped in April even though mortgage rates are low and US housing construction rose in April. The US Commerce Department reported that single-family homes sold at a seasonally adjusted annual rate of 673,000 units in April, plummeting from 723,000 in March.
Why did US new home sales fall in April?
US new home sales fell in April because of a decline in sales of homes worth less than $300,000. Those homes are usually purchased by first-time or middle-class homebuyers, but more affordable houses on the market caused new home sales to drop. New home sales fell most in southern, midwestern, and western US states.
Can US new home sales improve?
Though US new home sales declined, Lawrence Yun, the National Association of Realtors' chief economist, said that a strong job market should eventually cause an increase in new homeownership.
‘First, we are seeing historically low mortgage rates combined with a pent-up demand to buy, so buyers will look to take advantage of these conditions,’ said Yun.
‘Also, job creation is improving, causing wage growth to align with home price growth, which helps affordability and will help spur more home sales,’ added Yun.
Sam Khater, economist for mortgage loan company, Freddie Mac, also has an optimistic outlook about the US housing market. He wrote about the expectation of robust new home sales in the summer in a monthly report.
‘Our outlook for the housing market remains largely unchanged. We still expect stronger home sales and housing starts in the coming months due to favourable market conditions and accelerating wage growth,’ wrote Khater.
This information has been prepared by IG, a trading name of IG Markets Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. See full non-independent research disclaimer and quarterly summary.
See an opportunity to trade?
Go long or short on more than 16,000 markets with IG.
Spread bet and trade CFDs on our award-winning platform, with low spreads on indices, shares, commodities and more.
Live prices on most popular markets