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US new home sales fall more than expected in April

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Sales of new US single-family homes fell from near an 11-1/2-year high in April as prices rebounded, but demand for housing remains underpinned by declining mortgage rates and a strengthening labour market.

[WASHINGTON] Sales of new US single-family homes fell from near an 11-1/2-year high in April as prices rebounded, but demand for housing remains underpinned by declining mortgage rates and a strengthening labor market.

The Commerce Department said on Thursday new home sales dropped 6.9 per cent to a seasonally adjusted annual rate of 673,000 units last month. March's sales pace was revised up to 723,000 units, the highest level since October 2007, from the previously reported 692,000 units.

April's decline followed three straight monthly increases

Economists polled by Reuters had forecast new home sales, which account for about 10 per cent of housing market sales, would decrease 2.8 per cent to a pace of 675,000 units in April.

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Sales increased 7.0 per cent from a year ago. The median new house price increased 8.8 per cent from a year ago to $342,200 in April, the highest level since December 2017.

New home sales had in recent months outperformed other housing market indicators, including building permits, which had dropped for five straight months in April. New home sales are drawn from permits.

Economists attributed the recent strength in new home sales to declining mortgage rates. The new housing market has not been severely constrained by an inventory shortage, which has crippled sales of previously owned homes.

A report on Tuesday showed existing home sales fell for a second straight month in April, weighed down by a chronic shortage of more affordable houses.

The overall housing market hit a soft patch year and has contracted for five straight quarters. With the 30-year fixed mortgage rate dropping to around 4.07 per cent from near an eight-year high of 4.94 per cent in November, there is reason to be cautiously optimistic about the housing market.

REUTERS