Sales of new homes increased from March to April, a sign that buyers might be reentering the market amid somewhat lower mortgage rates.
New home sales in April rose 4.1% last month to a seasonally adjusted annual rate of 683,000, according to a report Tuesday from the Census Bureau. The reading follows some declines in mortgage rates, which could be spurring more home purchases. Sales were 11.8% lower than in April 2022.
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As of Tuesday, the average rate on a 30-year, fixed-rate mortgage was 6.39%, down from a recent peak of over 7% in October and into November, according to Freddie Mac. But that number is up from a recent low of just under 6.1% registered in late January and early February. The rate on an average 15-year, fixed-rate mortgage was 5.75%.
The median sales price for a new home was $420,800 in April, a decrease from the month before.
Sales are down by a huge margin from the massive peaks notched in 2020, when the Federal Reserve slashed its interest rate target to near-zero. The housing market is in what most economists characterize as a recession, and many fear that the downturn portends an even bigger broader economywide recession.
The Fed once again hiked interest rates earlier this month by a modest quarter of a percentage point despite the uncertainty stemming from the failures of Silicon Valley Bank and Signature Bank and, more recently, First Republic Bank. That means more pressure on mortgage rates this year.
In other recent housing news, sales of existing homes declined in April, down a whopping 23.2% from the year before. Existing-home sales fell by 3.4% in April to a seasonally adjusted annual rate of 4.28 million, according to a report by the National Association of Realtors.
The median price of an existing home in April was $388,800, a decline of 1.7% from the year before. Additionally, homes typically remained on the market for 22 days in April, down from 29 days in March but up from 17 days in April 2022.
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“Home sales are bouncing back and forth but remain above recent cyclical lows,” NAR Chief Economist Lawrence Yun said. “The combination of job gains, limited inventory and fluctuating mortgage rates over the last several months have created an environment of push-pull housing demand.”
The Fed’s key overnight rate is now sitting at 5% to 5.25%, and the next time that could rise is next month. Most investors expect the Fed to pause rate hikes in June, although a couple of Fed officials on Monday cautioned that pausing is not a foregone conclusion.