- New home sales slowed through April to an annual pace of 591,000 units, the Census Bureau said.
- That landed below the average forecast of a 750,000-home pace and marked the slowest rate in two years.
- Home affordability has been slammed by surging mortgage rates and record-high prices in 2022.
Sales of new homes in the US plummeted in April to the slowest rate in two years as buyers' demand collided with soaring mortgage rates and sky-high selling prices.
New single-family home sales slowed through April to a seasonally adjusted annual rate of 591,000 units, the Census Bureau announced Tuesday morning. That landed well below the economist forecast of a 750,000-home pace and reflected a nearly 17% slowdown from the prior month's rate.
The pace of sales is now the slowest since April 2020, when the coronavirus crash and widespread lockdowns curbed activity throughout the US economy.
March new home sales were revised to a pace of 709,000 from a preliminary rate of 763,000 units.
The report offers an early sign that the buying frenzy that's boosted the housing market throughout the pandemic might be quickly losing momentum. Sales started to slow in 2021 as Americans squared up against the fastest home-price growth in decades. The price rally has held strong through 2022, offering little relief for buyers trying to find a deal.
Soaring interest rates have also put downward pressure on demand. The Federal Reserve has raised interest rates twice this year in a bid to cool demand and ease inflation. Those rate hikes lift borrowing costs throughout the economy, including through higher mortgage rates. Home loans are now the priciest they've been since 2009, further eroding affordability in the housing market.
"Affordability is a growing challenge as higher new-home prices and rising mortgage rates are pricing out some buyers," Odeta Kushi, First American chief economist, told Insider. "One year ago, 25% of new-home sales were priced below $300,000. In April of this year, only 10% of new home sales were priced below $300,000."
As prices surge, millions of homebuyers have been priced out of the market – especially the nation's first-time homebuyers. According to a study by TD Bank, the demographic is becoming increasingly daunted by homeownership.
TD Bank surveyed more than 1,000 hopeful buyers and discovered that 29% are uncertain if right now is a good time to purchase a home. Of all concerns, affordability seems to be the biggest hang up as 67% of participants cited it as a concern, while 46% said saving for a down payment was their biggest hurdle to homeownership.
"Low inventory, steep competition, and high prices in many areas across the U.S. are fueling fears for buyers and creating an even more daunting undertaking for those entering the market for the first time," researchers wrote.
Overall, TD's survey found that only 36% of this year's potential homebuyers believe now is a good time to buy – a steep decline from 59% in 2021 and "a dramatic drop" from 2020 when 68% of prospective buyers thought it was a good time to purchase a home. Tuesday's report suggests that pessimism is finally making its way into actual market activity. As buyers become increasingly wary of the market, any speculation over a potential housing bubble can be put to rest – especially if demand continues to cool.