WASHINGTON: Sales of new US single-family homes fell less than expected in April amid a rise in transactions in the South and Northeast, and data for the prior three months was revised lower, suggesting the housing market was struggling to regain momentum.
Economists said rising mortgage rates did not appear to be significantly hurting sales and blamed the drop in purchases on an acute shortage of houses at the lower end of the market.
Mortgage rates have climbed to seven-year highs as a healthy economy and tightening labour market fan fears of inflation and expectations of aggressive interest rate increases from the Federal Reserve. The US central bank raised interest rates in March and has forecast at least two more hikes for this year. “New home sales are not showing signs of headlong retreat, so we know that higher interest rates have not really begun to bite yet and slow sales activity in a worrisome way,” said Chris Rupkey, chief economist at MUFG.
The Commerce Department said on Wednesday new home sales dropped 1.5 per cent to a seasonally adjusted annual rate of 662,000 units last month. March’s sales pace was revised down to 672,000 units from the previously reported 694,000 units.
Home sales in February and January were not as strong as initially estimated. Economists polled by Reuters had forecast new home sales, which account for 11 per cent of housing market sales, falling 2.0 per cent to a pace of 679,000 units in April.
New home sales are drawn from permits and tend to be volatile on a month-to-month basis. They increased 11.6 per cent from a year ago.
The PHLX housing index was trading higher, outperforming a broadly weaker US stock market. The dollar rose against a basket of currencies. Prices for US Treasuries were trading higher.
New home sales are benefiting from an inventory squeeze in the market for previously owned houses, which is constraining home resales. Builders have been unable to keep up with demand for housing, which is being driven by a robust labour market, citing expensive lumber as well as land and worker shortages.
Tight inventories are pushing up house prices. Expensive houses and rising mortgage rates are making home purchasing less affordable, especially for first-time buyers who account for less than a third of transactions.
The 30-year fixed-rate mortgage rate averaged 4.61 per cent in the week ended May 17, the highest level since May 2011, according to mortgage finance agency Freddie Mac. That compared to an average of 4.55 per cent in the previous week. — Reuters
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