The Census Bureau reported new home sales for April that were a little lighter than expected. April new home sales posted at a seasonally adjusted annual rate of 662,000. The previous three months were revised lower, with March sales seeing a significant downward revision.
The average price of a new home contracted in April was $407,300, a sharp increase from the same time a year ago. The median price of a new home sold (contract signing) was roughly flat at $312,400. That dramatically higher average contract price in April offers a good clue as to why new home sales were weaker than expected. New home sales were still up 11.6% from April of last year, but last year was a really easy comparison.
New homes are significantly more expensive than resale homes in most major markets, including here in the Dallas-Fort Worth area. Those high new home prices are bumping up against higher mortgage interest rates. This is posing some challenges for new home builders. Yesterday’s drubbing of luxury home builder Toll Brothers was just one example of how the shifting housing market (and higher interest rates) is affecting home builders and developers.
So far higher mortgage rates haven’t stopped new home sales in Denton County. April data show that new home closings in Denton County rose by 6.3% compared to last year. That being said, average prices for new homes in Denton County rose by just 1.5% in April, and median prices of new homes in the area show to be down by 2.1% in April.
The Federal Reserve is still calling for more rate hikes this year. It remains to be seen if new home sales will get flattened by the Fed’s credibility trap, but that’s a scenario that looks increasingly likely. The FHA’s mortgage portfolio is already showing some noticeable deterioration in terms of higher debt-to-income ratios and lower credit scores.
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