Sales of new US single-family homes fell from 11.5 year highs in April as prices rebounded and manufacturing activity slowed to its lowest level in nearly a decade in May, pointing to a slowdown in economic activity.
But other data Thursday showed the number of Americans filing claims for unemployment benefits unexpectedly fell last week. Labor market strength should support the economy, which is slowing as last year’s massive stimulus from The Trump Administration’s tax cuts and spending increases fades.
The Commerce Department said new home sales dropped 6.9% to a seasonally adjusted annual rate of 673,000 units last month. That followed March’s sales pace of 723,000 units, which was the highest level since October 2007. April’s decline came after 3 straight monthly increases
Economists polled by Reuters had forecast new home sales, which account for about 10% of housing market sales, would decrease 2.8% to a pace of 675,000 units in April.
Sales increased 7.0% from a year ago. The median new house price increased 8.8% from a year ago to $342,200 in April, the highest mark since December 2017.
New home sales had in recent months outperformed other housing market indicators, including building permits, which had dropped for five straight months in April. New home sales are drawn from permits.
Economists attributed the recent strength in new home sales to declining mortgage rates and lower prices. The new housing market has not been severely constrained by an inventory shortage, which has crippled sales of previously owned homes.
Last month’s drop in new home sales was almost across the board. Sales in the South, which accounts for the bulk of transactions, declined 7.3% in April. Sales in the Midwest dropped 7.4% and those in the West tumbled 8.3%. But sales in the Northeast jumped 11.5%.
There were 332,000 new homes on the market last month, down 0.9% from March. While builders have stepped up construction of more affordable homes to meet strong demand in this market segment, land and labor shortages remain a challenge.
At April’s sales pace it would take 5.9 months to clear the supply of houses on the market, up from 5.6 months in March.
About 67% of the houses sold last month were either under construction or yet to be built.