New home sales surged in April, jumping to a seasonally adjusted rate of 619,000. This is up strongly from 531,000 in March. Even when looking at a less volatile measure-the 12-month rolling total-starts are up 10% year over year and 3% month over month. The gain reflects a sharp increase in demand from homebuyers and a healthy U.S. economy, and should put to rest fears of an oncoming recession. April’s large jump should also instill homebuilder confidence throughout the remainder of the year. Home sales in April show a sharp climb back normal, as they are now 79% of the 50-year average. This is up from 77% in March.
The supply of new homes also dropped sharply. The months’ supply in April decreased sharply to 4.7 months, down from 5.5 in March. A decreasing supply of new homes is sour news for homebuyers, who have also been stymied by low inventory of existing homes over the past four years. The drop in supply means sales prices for new homes may rise quickly throughout the remainder of the home buying season.
