WASHINGTON, D.C. – Increasing mortgage interest rates and rapidly-rising home prices have finally caught up with the housing market, as sales of new single-family homes dropped significantly in April, causing experts to issue warnings that a recession could be imminent, reports say.
Sales of new homes in the United States plunged 16.6 percent in April from the level they were at in March, which represents a year-over-year drop of 26.9 percent from April 2021; according to National Association of Home Builders chief economist Robert Dietz, this could translate into further bad news for an economy already battered by ongoing inflation.
“The April drop for new home sales is a clear recession warning. The combination of higher prices and increased interest rates are generating a notable slowing of the housing market,” said Dietz. “While the nation needs additional housing, home sales are slackening as tightening monetary policy continues to put upward pressure on mortgage rates and supply chain disruptions raise construction costs.”
Prices of new homes have been skyrocketing for quite some time now, driving concerns regarding affordability, especially for first-time buyers; in April, the median sales price nationally for a new single-family home was $450,600, which represents a 19.6 percent increase over the same period of time one year prior.
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And while rampant home-buying was fueled in the recent past by historically-cheap borrowing costs, recently rising home mortgage interest rates – the average rate on a 30-year fixed mortgage is now about 5.3 percent, compared to just 3.2 percent in January – combined with an expensive housing market is all-but shutting out many buyers on a budget.
As a result, the inventory of available new homes on the market has increased; in April, there were 444,000 new homes for sale – a nine-month supply – compared to April 2021, when there was just a 4.7 month supply available.