New home sales took a serious nosedive in April. The Census Bureau reported new home sales for April at a seasonally adjusted annual rate (SAAR) of 591,000. That was way below consensus estimates and a 16.6 percent slide from the March figure.  New home sales were down 26.9 percent from April of last year. Previous months’ estimates were also revised lower.

The following two charts help explain why the consensus has been oblivious to what’s really happening. Something was bound to give, and it finally did.

U.S. New Home Prices April 2022

In layman’s terms, new homes are no longer affordable for the typical American home buyer. The median sales price for a new house sold in April 2022 hit $450,600. The average sales price rose to a record $570,300. Those are crazy numbers considering the sharp rise in mortgage rates this year. Obviously some buyers are still willing to stomach these nosebleed prices for new construction. Unfortunately the pool of potential candidates has become much smaller with new home affordability exiting stage left.

The sharp drop in new construction sales squares directly with what I have been experiencing on the ground the past few weeks. I’ve been receiving a number of inventory releases and “opportunities” from builder sales reps as the concept of market uncertainty and competition becomes a thing again. 12 months ago it was challenging to get a builder sales rep to even return a phone call. Things are changing now that the flow and the liquidity from the Fed are reversing course.

“The seasonally‐adjusted estimate of new houses for sale at the end of April was 444,000. This represents a supply of 9.0 months at the current sales rate.” Unadjusted numbers show 437,000 new homes for sale at the end of April. 119,000 have not started construction, while 281,000 are under construction. There were 37,000 completed new homes for sale at the end of April.

New home inventory is finally perking up. That’s welcome news if you are a prospective buyer. Probably not what you want to hear if you are a builder.

New construction sales in North Texas have been faring better than the census numbers reflect. New construction sales were down 9.1 percent in April according to NTREIS figures. Pending contracts for new homes were down 3.4 percent. The average new home price in North Texas was $476,444. Area builders are obviously doing a better job of keeping the price points down to maintain some sales volume. Builders will need to keep a lid on those prices if they hope to maintain any sales momentum.

The Fed has made it clear they intend to inflict pain on the markets, and so far they are doing it. Quantitative tightening begins next week. May the force (and the flow) be with you.

If you are in the market for a new home, my advice is pretty simple… be patient!

Housing Units Under Construction April 2022