New single-family home sales did something remarkable this month. Sales in this sector rose significantly month-over-month and year-over-year to reach the highest level since 2008 despite falling inventory levels.
U.S. Census Bureau and HUD estimates found that new single-family home sales in April 2016 were at a seasonally adjusted annual rate of 619,000, a 16.6 percent increased from March's rate of 531,000 and up 23.8 percent from last April's estimate of 500,000.
Ralph B. McLaughlin, Chief Economist, Trulia said, "The gain reflects a sharp increase in demand from homebuyers and a healthy U.S. economy, and should put to rest fears of an oncoming recession. April’s large jump should also instill homebuilder confidence throughout the remainder of the year. Home sales in April show a sharp climb back normal, as they are now 79 percent of the 50-year average. This is up from 77 percent in March."
Some economists, like Realtor.com Chief Economist Jonathan Smoke feel that the new home market is having its best spring buying season in a decade.
Smoke reported that April’s non-seasonally adjusted volume of new home contracts was estimated to be 61,000, which was the highest April volume since 2007. However, a key difference he noted between now and 2007 is that 38 percent of the new homes sold then were completed speculative inventory. In April, less than 30 percent of new homes sold were completed.
"It appears that the growth in sales is coming from higher price points, indicating that builders are finding success with move-up, luxury, and active adult home buyers rather than entry level buyers," Smoke said. "Hopefully this will free up existing home owners to sell their lower priced homes as they move up.
The Bureau and HUD reported that the median sales price of new houses sold in April 2016 was $321,100 and the average sales price was $379,800. Meanwhile, the seasonally adjusted estimate of new houses for sale at the end of April was 243,000, which represents a below-normal supply of 4.7 months at the current sales rate. Inventory levels in March were 5.5 percent and in April of last year they were at 5.0 percent.
"A decreasing supply of new homes is sour news for homebuyers, who have also been stymied by low inventory of existing homes over the past four years," McLaughlin said. "The drop in supply means sales prices for new homes may rise quickly throughout the remainder of the home buying season."
Robert Dietz, Chief Economist, National Association of Home Builders (NAHB) noted, "As regulatory costs rise, it remains difficult for builders to add inventory to the lower-price tiers."
He continued, "As a whole, the April data represents good news for the building sector and is consistent with the Housing Market Index, which shows builders’ cautious optimism in the industry. NAHB’s forecast is for single-family starts to continue to expand as housing demand increases and existing inventory remains tight."