New home sales unexpectedly surge despite high mortgage rates as builders lower prices

Sales of new US single-family homes surged to more than a three-year high in April as builders lowered prices to attract buyers, but rising mortgage rates and economic uncertainty remained headwinds for the housing market.Data for February and March was revised significantly down, taking some of the shine from the unexpected increase in sales last month reported by the Commerce Department on Friday.“Strength in new home sales does not change our view that housing activity is weakening further in the second quarter and is likely to remain soft this year,” said Veronica Clark, an economist at Citigroup.“Still-high rates and a slowing labor market will weigh further on housing demand.”New home sales surged 10.9% to a seasonally adjusted annual rate of 743,000 units last month, the Commerce Department’s Census Bureau said on Friday.The sales pace for March was revised down to a rate of 670,000 units from the previously reported 724,000 units, while that for February was downgraded to 653,000 units from 674,000 units.Economists polled by Reuters had forecast new home sales, which make up about 15.7% of US home sales, declining to a rate of 693,000 units.

New home sales, which are counted at the signing of a contract, are volatile on a month-to-month basis and subject to big revisions.They advanced 3.3% on a year-on-year basis in April. Sales last month tumbled 14.8% in the Northeast.They, however, jumped 35.5% in the Midwest and increased 11.7% in the densely populated South. Sales climbed 3.3% in the West.Higher mortgage rates and an unsettled economic outlook amid President Trump’s aggressive trade policy and mass firings of public workers have sidelined buyers, leaving builders to cut prices and offer incentives to ease some of the squeeze on buyers from higher borrowing costs.The median new house price dropped 2.0% to $407,200 in April from a year earlier.

Prices could moderate further as the National Association of Homebuilders r...