New home sales explode 16.6% in April, giving buyers, sellers an opportunity
The spring home-buying season definitely has sprung. Sales of new homes soared 16.6% in April, blowing away economists’ expectations for a rise of 1.8%, the Commerce Department said Tuesday. It’s a huge turnaround from March, when sales dipped for the third consecutive month. Steve Udelson, president of real estate brokerage Owners.com, breaks down what it all means.
Q: WHAT DO YOU THINK OF TUESDAY’S NEW-HOME SALES DATA?
A: Sales of new homes increased in April to the highest level in eight years to a seasonally adjusted annual rate of 619,000. This signals a healthy real estate market, especially coming on the heels of an increase in existing home sales announced last week. With continued job growth and low mortgage rates, demand is solid. From a regional perspective, sales in the South and Northeast climbed, and sales improved in the West as well. In addition, the Midwest set a fast pace for existing home sales as reported last week. Taken together, this is all good news for the housing market.
Q: WHAT ARE YOUR OBSERVATIONS ABOUT SALES SO FAR THIS YEAR?
A: While the early start of the year was a bit slower than usual, the spring real estate market is on a steady incline. It’s a strong market from an inventory perspective as well. Buyer demand is exceptionally high in the midpriced market but a bit softer than usual in the very low and very high ends of the market. I project a solid spring real estate season will continue well into the summer.
Q: WHAT ARE YOUR THOUGHTS ON THE EFFECTS OF A POSSIBLE INTEREST RATE INCREASE BY THE FED IN JUNE?
A: There is no doubt interest rates can impact the real estate market and mortgage rates. However, we saw very modest changes during the first interest rate increase last year and anticipate the same this time around. That said, if interest rates go back up to more normal levels, we can expect this will have a bigger impact on mortgage rates and create more pressure from an affordability standpoint. But keep in mind — the Fed repeatedly has said it will approach any rate increases very incrementally. My advice to buyers is to shop smart and look for opportunities to save on closing costs or take advantage of commission rebates being offered by many brokerages.
Q: ANY ADVICE FOR BUYERS RIGHT ABOUT NOW?
A: Buyers should do their homework and get smart and informed about the home-buying process as the first step. It’s no surprise that potential home buyers are using online tools to narrow their search and identify their “dream” homes, learn about the market in certain neighborhoods and understand key facts, like a home’s price history. And because this helps buyers be more self-reliant, they can save money on commissions they’d typically have paid to a real estate agent. This can make a big difference when buying a home, which is usually the biggest purchase someone will make in their lifetime.
Q: ANY ADVICE FOR SELLERS RIGHT NOW?
A: Sellers can save by doing more of the work on their own, too. Sellers can put together their own listings, figure out how to set the price and sometimes handle the showings. Getting the asking price right is absolutely key. Too high and the listing will go stale, but too low ends up leaving money on the table. Keep in mind the first few weeks a house is listed are the busiest, and often if a house has no offers on it during this time period, the owner may need to re-evaluate the price. It’s also important to get highquality, professional pictures of a home posted online with the listing the first time around. Keep the home as clean and staged as it is in those pictures for visits from potential buyers.