US housing demand remains strong despite drop in sales
Aerial of homes in Florida suburb.
Housing recovery in the US remains intact even as new single-family home sales fell 11.4 percent to a seasonally adjusted annual rate of 569,000 units in April, reported Reuters.
The drop comes after new home sales in March was revised up to 642,000 units, or its highest level since October 2007.
Accounting for 9.8 percent of the total home sales, new home sales are volatile on a month-on-month basis. Economists said sales was pulled forward into the first quarter by unseasonably mild weather.
“Demand for housing remains strong and the usual list of support factors hasn’t changed, with the key items being job growth and wage gains,” noted BMO Capital Markets senior economist Jennifer Lee.
In fact, sales rose 0.5 percent on an annual basis in April, even as economists expect sales to decrease by 1.5 percent to 610,000 units from the previously expected pace of 621,000 units.
The demand for housing is underpinned by improving labour market, which registered an unemployment rate of just 4.4 percent, and historically low mortgage rates, which saw the 30-year fixed mortgage rate stand at just above 4.0 percent.
With this, homebuilder sentiment has been on the uptrend in May, showed a survey released last week.
However, builders have been struggling to meet demand due to the increasing cost of building materials and shortage of labour and lots.
Last week, it was reported that homebuilding fell for a second consecutive month in April, its lowest level in five months.
“Builders are running up against shortages of developed lots and having increasing difficulty finding skilled construction workers,” said Wells Fargo Securities senior economist Mark Vitner.
This article was edited by Denise Djong.
