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U.S. home prices hit record highs, rising mortgages dampen new home sales According to Reuters



© Reuters. FILE PHOTO: A home under construction stands behind a “sold” sign during a new development in York County, South Carolina, U.S., February 29, 2020. REUTERS/Lucas Jackson

By Lucia Mutikani

WASHINGTON (Reuters) – Sales of new single-family homes in the U.S. fell to a two-year low in April, possibly as higher mortgage rates and record prices have squeezed those First-time buyers and low-end property seekers out of the housing market.

The fourth straight monthly sales decline reported by the Commerce Department on Tuesday added to last week’s data showing a drop in single-family building permits in April and weakness. Continued in sales of previously owned homes suggests demand for housing is cooling.

However, the housing market downturn could be capped by record low inventories. This is the segment of the economy that is most sensitive to interest rates. The Federal Reserve is increasing borrowing costs to reduce domestic demand and curb inflation.

Daniel Silver, economist at JPMorgan (NYSE:) in New York, said: “Activity in the housing market has cooled significantly in recent months along with the spike in mortgage rates during the period. recently. “While higher rates could hurt sales, limited availability of inventory and high home prices could also limit activity.”

New home sales fell 16.6% to a seasonally adjusted annualized rate of 591,000 units last month, the lowest level since April 2020. March’s sales pace was revised down to 709,000 units compared to the previous month. with 763,000 units reported previously. Sales fell 5.9% in the Northeast and 15.1% in the Midwest. This rate dropped sharply by 19.8% in the densely populated South and by 13.8% in the West.

Economists polled by Reuters had forecast that new home sales, which account for 9.5% of US home sales, would fall to 750,000 units. Sales fell 26.9 percent year-on-year in April. They hit a peak of 993,000 units in January 2021, which is the highest level since late 2006.

Graphics: New home for sale – https://graphics.reuters.com/USA-STOCKS/xmvjoxblgpr/nhs.png 24ff62ed-9a34-4609-9aed-66836e66320f1

Although volatile from month to month, new home sales are a leading indicator for the housing market as they are calculated at the time of contract signing.

Stocks on Wall Street are lower. The dollar depreciated against a basket of currencies. US Treasury prices rose.

REDUCED RESPONSIBILITIES

A 30-year fixed-rate mortgage rose above 5% in April for the first time since February 2011, according to data from the mortgage finance agency. Freddie Mac (OTC :). It rose, averaging 5.25% in the week ending May 19.

The Fed has raised its policy rate by 75 basis points since March. The US central bank is expected to raise that rate by half a percentage point at each of its subsequent policy meetings in June and July.

Last week’s data showed sales of previously owned homes fell to a two-year low in April, while single-family building permits were the lowest since last October. Single-family home-building athletes’ confidence neared a two-year low in May.

While a weakening housing market could weigh on economic growth this quarter, economists aren’t sounding the alarm.

“The housing market is now back to pre-pandemic levels, so this big April hit shouldn’t be,” said Jeffrey Roach, chief economist at LPL Financial (NASDAQ:) in Charlotte, North Carolina. interpreted as an exploding bubble.

A moderate revenue increase could allow for an increase in supply and slow double-digit price growth. The average new home price in April rose 19.6% from a year ago to a record $450,600. The median home price rose much faster 31.2% to $570,300, which suggests stronger price gains for lower-end homes.

“Combine that with the significant increase in financing costs and price sensitivity in the beginner home market and it seems that cost-passing builders is a big deal,” said director Chris Low. significant factor in the drop in sales, perhaps as significant as the increase in mortgage rates.” economist at FHN Financial in New York.

Almost all of the homes sold in the last month were above $200,000. There were 444,000 new homes on the market at the end of April, up from 410,000 in March. Homes under construction accounted for about 65% of inventory, of which unbuilt homes accounted for about 27%.

The backlog of homes that have been approved for construction but not yet commenced is at an all-time high as builders grapple with shortages and higher prices for materials. inputs such as wood for framing, as well as cabinets, garage doors, countertops and appliances.

At April’s sales pace, it would take 9.0 months to provide housing on the market, up from 6.9 months in March.

The slowdown in activity was also evident in a survey from S&P Global (NYSE:) on Tuesday that showed the US Composite PMI Output Index, which tracks the manufacturing and service sectors, fell. 53.8 in May from 56.0 in April.

The slowest growth rate in four months was attributed to “increased inflationary pressures, poorer supplier delivery times and weaker demand growth.” A reading above 50 indicates expansion in the private sector.

Veronica Clark, economist at Citigroup (NYSE:) in New York.



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