New Home Sales Fell in April: Will they Rebound? Predictions

image

New home sales are slumping due to rising costs. Will they rebound in 2024? Let’s find out. The dream of homeownership has recently taken a hit as the U.S. housing market navigates a period of shifting dynamicsSales of newly built homes dipped 4.7% in April compared to March, according to data released by the U.S. Census. This decline is even more pronounced on a year-over-year basis, with sales falling 7.7% from April 2023.

The culprit behind this slowdown is clear: rising interest rates. The monthly sales figures track contracts signed during the month, reflecting buyer decisions based on prevailing interest rates. In March, the average rate for a 30-year fixed mortgage hovered around 6%. By April, that rate had jumped to a staggering 7.5%, significantly impacting affordability.

Beyond rising interest rates, potential homebuyers face another hurdle: an increase in home prices. The median price of a new home in April reached $433,500, a 4% increase over April 2023. This can partly be explained by the type of homes currently selling – often on the higher end of the market. These buyers are typically less affected by interest rate fluctuations as they may be paying in cash.

Builders are grappling with this new reality. They’re facing high costs for land, labor, and materials, making price reductions difficult. Some large builders have tried to ease the burden for buyers by offering to buy down mortgage rates.

Their sheer size allows them to absorb some of these costs. However, as Peter Boockvar, a CNBC contributor, points out, “the entire new build industry is selling new homes at a pace below the 5-year average.” This suggests these efforts may not be enough to completely offset the affordability challenges.

Challenges for Low- and Middle-Income Earners

The data paints a concerning picture for low- and middle-income earners. A new index launched by the National Association of Home Builders (NAHB) and Wells Fargo revealed that in the first quarter of 2024, 38% of a median household income nationally was required to afford the mortgage payment on a median-priced new single-family home. This number jumps to a staggering 77% for low-income families earning only 50% of the area’s median income.

While there’s a persistent shortage of homes on the market, driving prices up for both new and existing properties, simply building more houses isn’t a silver bullet. While an increase in overall supply would undoubtedly help, it’s important to consider the type of housing being built.

The current market landscape favors single-family homes, which tend to be more expensive than condos, townhouses, or multi-family units. Additionally, many new construction projects are located in suburbs or exurbs, further out from city centers.

This can be a barrier for low- and middle-income earners who may rely on public transportation or prefer a more walkable urban environment. Zoning regulations and lengthy permitting processes can also hinder the development of more affordable housing options in areas with high demand.

“The lack of housing units is the primary cause of growing housing affordability challenges,” says Robert Dietz, NAHB’s chief economist. He urges policymakers to enact changes that would allow builders to construct more homes, such as streamlining permit approvals, investing in skilled labor training, and addressing issues in the building material supply chain.

Forecast for the Remainder of 2024:

Experts are divided on the exact trajectory of new home sales in 2024. Here are some conflicting forces at play:

  • Potential Rise in Sales: Organizations like the National Association of Realtors (NAR) predict a slight increase in sales compared to 2023. This is based on the persistent shortage of homes on the market, which could still drive some buyers towards new construction.
  • Headwinds from Affordability: However, the significant jump in interest rates and overall affordability concerns could dampen sales activity. If rates continue to climb or home prices rise further, it could push many potential buyers out of the market.

The Bottom Line: The forecast for new home sales in 2024 remains uncertain. It will likely depend on how interest rates fluctuate and how builders manage to address affordability concerns. Builders may need to offer incentives or shift their focus towards more affordable housing options to attract buyers in this changing market.

Navigating the New Homes Market

So, what does this mean for you if you’re in the market for a new home? Be prepared to face a more competitive landscape with higher prices and interest rates. Carefully assess your budget and explore all your options. Don’t be afraid to negotiate with builders and consider all the financial incentives they might offer. Remember, knowledge is power in this market, so do your research and be a well-informed buyer.

Here are some additional tips for navigating the current housing market:

  • Get pre-approved for a mortgage: This will give you a clear picture of your budget and make you a more attractive buyer to sellers.
  • Be flexible with your search criteria: If you’re open to different locations, house sizes, or move-in timelines, you may find better deals.
  • Consider a fixer-upper: You can potentially find a good deal on a home that needs some work, but be sure to factor in the cost of renovations.

By staying informed, being patient, and making smart decisions, you can still achieve your dream of homeownership in this evolving market.


ALSO READ:

New Home Sales Trends and Forecast for 2024

Is the Housing Market Shifting? Key Trends to Watch (April Report)

Sign up to receive the best Underground art & real estate news in your inbox everyday.

We don’t spam! Read our privacy policy for more info.

This post was originally published on this site be sure to check out more of their content.