Housing Sector
U.S. home sales slowed in April amid high costs and uncertainty, while builders saw stronger sales but face rising cancellations and declining confidence in future demand.
U.S. existing home sales declined by 0.5% in April to a seasonally adjusted annual rate of 4.00 million units, marking the slowest April performance since 2009. Persistent affordability challenges, high housing costs, and growing economic uncertainty continue to dampen buyer activity. Despite a brief decline in mortgage rates earlier this year, sales have now fallen for the second consecutive month and are down 2.0% YoY. The median existing home price increased 1.8% from April 2024 to $414,000—the highest price ever recorded for April—though it represents the weakest annual gain since mid-2023. Inventory rose sharply by 20.8% YoY to 1.45 million units, the highest level in nearly five years, providing more bargaining power for buyers and signalling a possible cooling in home prices. Homes also remained on the market longer, averaging 29 days versus 26 days a year ago, while first-time buyers accounted for only 34% of purchases, still well below the 40% level typically seen as necessary for long-term market stability. The rise in resale inventory has intensified competition for homebuilders, prompting many to adopt price cuts and offer incentives to maintain buyer interest.
Amid this competitive landscape, homebuilders posted stronger-than-expected results in April, with new home sales reaching a seasonally adjusted annual rate of 743,000—an 11% increase from March and 3.3% higher than a year earlier—exceeding consensus expectations of 695,000. Although the median sales price for new homes rose slightly on a monthly basis, it remains 2% lower than the prior year and continues to decline from its 2022 peak. This reflects both increased use of price incentives and a broader shift toward more affordable housing options, as evidenced by the rise in homes sold under $400,000—from 46% a year ago to 49% in April. However, the headline figures may overstate market strength, as the data do not account for a growing number of contract cancellations driven by affordability pressures and broader economic uncertainty. Adding to concerns, homebuilder sentiment has deteriorated, with confidence and expectations for future single-family sales both falling to their lowest levels since November 2023. While underlying demand remains and incentives help support activity, the overall outlook for the housing market remains cautious and uncertain.
We expect continued pressure on the housing market as elevated costs and economic uncertainty persist, with builder incentives supporting demand but overall sentiment remaining cautious.