April Housing Market Diverges: New Home Sales Up, Existing Sales Down Amid Rising Treasury Yields

Weekly Economic Review: May 23, 2025

Sales of previously owned homes fell unexpectedly, but new home sales rose, supported by a sharp downward revision to the prior month’s figures; deficit concerns and weak demand at the 20-year Treasury auction contributed to a rise in long-term yields

Key Summary:

The week’s major economic data was centered in housing, starting with a decline in existing home sales for April, which came in lower than market expectations. This drop was largely driven by persistently high home prices, elevated mortgage rates, and historically low consumer confidence regarding the timing of home purchases. Despite the slowdown in sales, the median home price reached a record high for the month of April. This marked the 22nd consecutive month of year-over-year price increases, although the pace of growth has moderated.

On a more positive note, April saw an increase in first-time homebuyers, representing the highest share since July 2020. Additionally, a rise in home listings boosted the inventory of existing homes to its highest level since September 2020. While buyers now have more choices and greater room to negotiate, many remain cautious amid ongoing economic and employment uncertainty and other market headwinds.

Unlike existing home sales, new home sales, which are recorded at the time of contract signing, rose unexpectedly in April to their highest level since February 2022. This increase was largely attributed to a 7.5% downward revision to March’s sales figure, along with homebuilders offering price cuts and buyer incentives.

Although the inventory of new homes declined slightly in April, it remains near the highest level since late 2007. Despite the uptick in sales, the outlook for the new home market is subdued due mainly to elevated new home inventory levels, high mortgage rate and price, and a growing inventory of previously owned homes.

Let’s examine in more detail the existing and new home sales statistics announced last week.

Existing Home Sales:

According to the National Association of Realtors, existing home sales dipped slightly by 0.5% in April, reaching an annualized rate of 4.00 million units – down from 4.02 million in March and below expectations. Regionally, sales rose 2.1% in the Midwest, while the Northeast and West saw de-clines of 2% and 3.9%, respectively. The South remained unchanged.

Compared to April 2024, sales were down 2.0% from 4.08 million units. The median home price across all housing types rose 1.8% year-over-year to $414,000. However, in the West, the median price edged down 0.2% to $628,500.

The inventory of unsold existing homes increased 9.0% in April to 1.45 million units – still below the pre-pandemic level of 1.9 million, but up 20.8% from a year ago. The Months Supply of Inventory (MSI) rose to 4.4 months, up from 4.0 in March and 3.5 a year ago. A 4-to-7-month supply is considered a balanced market.

First-time buyers accounted for 34% of April sales, up from 32% in March and 33% a year ago. All-cash purchases made up 25% of transactions, down from 26% the previous month and 28% last year. Homes spent an average of 29 days on the market—faster than March’s 36 days but slightly longer than 26 days a year ago. Distressed sales, including foreclosures and short sales, made up 2% of transactions, down from 3% in March and unchanged year-over-year.

New Home Sales:

New single-family home sales rose 10.9% in April, reaching a seasonally adjusted annual rate of 743,000, according to the U.S. Census Bureau and the Department of Housing and Urban Development. This follows a revised 2.6% increase in March, with that month’s figure adjusted down to 670,000 from the initially reported 724,000. April’s sales figure surpassed market expectations of 695,000. Year-over-year, sales were up 3.3% from 719,000 in April 2024.

Regionally, gains were seen in the South (up 11.7% to 478,000), Midwest (up 35.5% to 84,000), and West (up 3.3% to 158,000), while the Northeast saw a decline of 14.8% to 23,000. The inventory of new homes for sale rose to 504,000, representing an 8.1-month supply at the current sales pace. The median sales price in April was $407,200, down 2.0% from $415,300 a year earlier.

Conclusion: :

This week, investor attention pivoted from tariff-related issues under the Trump administration to growing fiscal concerns. The shift was driven by apprehensions over the expanding fiscal deficit and rising national debt, stemming from the tax and spending legislation currently in Congress. These worries were compounded by Moody’s recent downgrade of the U.S. credit rating and tepid demand at Wednesday’s 20-year Treasury bond auction, both of which contributed to a rise in long-term Treasury yields. Notably, the yield on the 30-year Treasury surpassed the 5% mark. However, by Friday, long-dated yields edged slightly lower amid a pullback in Treasury selloffs and renewed trade tensions, as President Trump threatened higher tariffs on the European Union and Apple.

At the close of the week, yields on the 2-year, 5-year, and 10-year Treasury notes stood at 4.00%, 4.08%, and 4.51%, respectively—up 2, 2, and 8 basis points from the previous week. Market expectations remain unchanged, with two 25-basis-point rate cuts fully priced in for 2025, totaling 50 basis points. No rate cut is anticipated at the June FOMC meeting, and the probability of a 25-basis-point cut in July is just 26%, suggesting limited likelihood of near-term action. The first fully priced-in 25-basis-point cut is projected in October. An additional cut is expected in December, bringing the total projected rate reductions for the year to two.

Next Week’s Economic Calendar:Markets will closely watch several key economic indicators in the coming week for clues about the economy’s trajectory. On Tuesday, attention will turn to durable goods orders and the Conference Board’s Consumer Confidence Index. This will be followed by the second estimate of Q1 GDP on Thursday. To close out the week, Friday’s release of personal income and the PCE inflation data will be particularly significant for assessing the Federal Reserve’s policy outlook.

Mark Yoon, CFA CPA
EVP & CFO of Commercial Bank of California

Thomas McCullough
EVP of Commercial Bank of California

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