To the relief of housing professionals, the 23 percent decline in new home sales forecasted for April never came. In fact, new home sales actually posted a gain of 0.6 percent over March, according to Zillow. Consumer confidence is also up as states reopen and potential homebuyers return to the market. Still, the housing industry isn’t out of the woods yet. Signs in the manufacturing and servicing sectors point to contraction, though the rate of decline is slowing.
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. New home sales are often a more current measure of activity than existing home sales, and it seems clear that after some initial wobbliness, the market has certainly stabilized. Applications for mortgages have grown strongly over the last month as buyers look to capitalize on record-low interest rates, and builder confidence is showing early signs of coming back from the brink. A 5% monthly drop in new home prices points to builders eager to make deals and deliver for the critical middle segment of the market. The pandemic is almost certain to alter consumer preferences going forward, and a new appreciation for cleanliness and safety might sway more buyers to seek newly constructed, never-lived-in homes in the near future. Even so, construction projects themselves can be slow, and construction activity has slowed recently and will take some time to fully ramp back up — so inventory will remain tight for the foreseeable future. There is still a ways to go before we’re completely out of the woods, but today’s report is a huge step in the right direction.