While new home sales are known to be volatile, the latest April report shows signs that the housing market could finally be returning to normal after a series of up and down reports.
Sales of new single-family houses in April 2016 were at a seasonally adjusted annual rate of 619,000, according to estimates released jointly by the U.S. Department of Housing and Urban Development and the U.S. Census Bureau.
This is 16.6% above the revised March rate of 531,000 and is 23.8% above the April 2015 estimate of 500,000.
“New construction activity soared by almost 17% from March, leaving its recent gradual pace of expansion behind. We have seen positive permit and single-family starts activity with the number of single-family homes under construction up as well,” said Zillow Chief Economist Svenja Gudell.
Also rising, the median sales price of new houses sold in April 2016 jumped to $321,100, up from $288,000 in March, while the average sales price in April was $379,800, up from $356,200.
This represents a supply of 4.7 months at the current sales rate.
“So far new home sales have declined each month thus far in 2016, however are now up a whopping 24% from last April. This bodes well for home buyers as Zillow shows that inventory is still down 3.4% from last year and less expensive homes are even less available,” said Gudell.
“Unfortunately, the median price of new home sales is up almost 10% on an annual basis, leaving many first-time home buyers in the dust, as mortgage affordability for entry-level buyers is starting to become an issue in many markets, especially once mortgage rates rise beyond 4%,” she continued.
In the past, Trulia Chief Economist Ralph McLaughlin has cautioned that new home sales numbers from the U.S. Census are extremely volatile: the margin of error is wide and often includes zero, which means we can’t be certain whether these month-over-month or year-over-year changes actually increased, decreased, or stayed flat.
McLaughlin explained for this latest report that even when looking at a less volatile measure, the 12-month rolling total, starts are up 10% year over year and 3% month over month.
“The gain reflects a sharp increase in demand from homebuyers and a healthy U.S. economy, and should put to rest fears of an oncoming recession. April’s large jump should also instill homebuilder confidence throughout the remainder of the year,” said McLaughlin. “Home sales in April show a sharp climb back to normal, as they are now 79% of the 50-year average. This is up from 77% in March.”