Home sales data in US show slight increase in April 2020. Sales of newly built houses increased by 1% in April compared with March, according to the U.S. Census.
There is a strong demand lately, according to builders. Sentiment recovered in May after a sharp decline in April, based on a monthly index from the National Association of Home Builders.
“The April data for new home sales show the potential for housing to lead any recovery for the overall economy,” said Dean Mon, chairman of the NAHB and a homebuilder and developer from Shrewsbury, New Jersey.
“Because the housing industry entered this downturn underbuilt, there exists considerable pent-up housing demand on the sidelines. The experience of the virus mitigation has emphasized the importance of home for most Americans.”
Meanwhile, mortgage applications for home buying have also been experiencing stability for over a month.
After a sharp rise in March, mortgage rates dropped back in April, providing buyers more incentive. Builders were giving away additional incentives as well as lower prices. The median price of a newly built home fell by 8.5% annually to $309,900.
Part of that price decline was caused by a change in the mix of homes selling. Homes worth below $300,000 sold the most, while those higher than $500,000 fell.
“The coronavirus pandemic has generated any number of nasty surprises over the past few months, but the unexpected strength in April new home sales may be the first pleasant surprise yet — and the clearest indicator so far that housing, so unlike the last time around, will be a source of relative strength during this downturn,” said Matthew Speakman, an economist at Zillow.
Newly built homes
The market for new homes is reportedly faring better than the market for existing houses even if sales were still 6% lower in April, compared with April 2019.
Analysts believe this is because there is a bigger supply of newly built homes, a 6.3-month supply at the end of April. The National Association of Realtors said that compares to a 4.2-month supply of existing homes for sale.
It is also more convenient to show a newly built home in April than an existing home to buyers. Customers can go through new models or see various online plans, while most existing home sellers used virtual touring only, not allowing strangers in their homes due to the coronavirus crisis.
Buyers who stay at home due to quarantine may also be thinking of fleeing from the confined spaces of the city.
“Bottom line, considering an almost complete shutdown of the U.S. economy in April, it’s pretty surprising to see sales hold up as well as they did,” said Peter Boockvar, chief investment officer at Bleakley Advisory Group. “Maybe it’s people fleeing the cities or whatever and a median home price of $309,900, the lowest since July 2019.”
Consumer behavior
Economic recovery depends on the level of consumer fear, according to economists as the services sector leads the recession the US is experiencing.
Individual psychology, consumer confidence, and the success of government in filling the income gap for unemployed individuals all play a role in reviving the economy.
“It’s much more behavioral. It’s driven by fear,” said Diane Swonk, chief economist at Grant Thornton. Economists use China as a basis for their analysis, since the disease began there.
“Even a month after they reopened in Wuhan, people are still worried about going to public places and malls.”
