The rate of new home sales increased 6.4% in April from an upwardly revised March to 433,000 virtually matching the first quarter average of 434,000 (seasonally adjusted annual rate). The 26,000 monthly increase was entirely due to a 27,000 increase in sales in the Midwest region. However, the monthly and regional data are subject to significant variability so it is not clear that buying conditions were significantly different in the Midwest.
The April Midwest 84,000 monthly sales rate was significantly different from the 9-month average of 58,000 but still not within a 90% confidence interval indicating a change.
The most positive component of the release was a continued increase in inventory, now up to 192,000 homes for sale from a low of 142,000 in July 2012. Builders continue to experience supply chain difficulties but the slow increase in inventory indicates some ability to expand construction. More importantly, the increase in supply provides more opportunity for potential home buyers to find the home they want and provides an alternative to the very low supply of existing homes on the market.
New home sales prices dropped 1.2% but that is more likely a compositional effect of the large increase in sales in the Midwest; sales of homes over $400,000 declined slightly.
New home sales remain at half their normal levels as the economy and potential home buyers continue to readjust to the devastating impacts of the Great Recession and its aftermath. Housing market conditions are in good shape for a strong recovery; mortgage rates remain historically low, affordability while down from extremes remains good by historic standards and a significant amount of pent up demand remain unfulfilled. However, job growth is behind past recessions and income growth especially for young adults is slow or negative. As the economy improves on a more sustainable and consistent basis, housing will also improve more rapidly.