US new home sales surprise sharply to the downside in April

New home sales surprised to the downside in April, in part as demand driven by the Covid-19 pandemic waned.

According to the Department of Commerce, the annualised rate of new home sales fell from 917,000 for March to 863,000 in April.

Economists had penciled-in a reading of 950,000.

Commenting on the latest figures, Ian Shepherdson, chief economist at Pantheon Macroeconomics, attributed the decline to less demand for homes outside cities, including for bigger homes in the suburbs, higher mortgage rates and tighter lending standards.

"Rates have now reversed about 20bp of the 50bp increase from mid-December through early April, and we’re hoping to see lending standards ease as the economy reopens.

"This should lift mortgage applications over the next few months, triggering a rebound in sales in the summer or fall, but the near-term outlook is poor."

Furthermore, while tight supply was still driving rapid home price increases, homebuilders had begun to catch-up with the surge in sales seen since mid-2020.