Real Estate

Rani Molla is a Bloomberg Gadfly columnist using data visualizations to cover corporations and markets. She previously worked for the Wall Street Journal.

New home sales in April rose to their highest level in eight years -- and reached their highest median price, ever -- but don’t throw a house-warming party for an economic recovery just yet.

April Showers
Monthly single-family home sales at an annualized rate
Source: Census Bureau

Monthly housing numbers can be extremely volatile. And, April aside, sales gains have actually been pretty modest this year. In the first three months of 2016, home sales rose less than 1 percent from the same period in 2015, according to Census Bureau data.

Supply Slide
Inventory of new homes at the current sales rate
Source: Census Bureau

The main reason for April’s jump is pent-up demand generated from low new housing inventories. Currently there’s a 4.7-month supply of new homes, whereas a six-month supply is considered normal, according to Bloomberg Intelligence analyst Drew Reading.

Homebuyers, of course, are also eager to lock in cheap mortgages before the Federal Reserve hikes interest rates.

Slow Start
Monthly single-family housing starts, annualized
Source: Census Bureau

In the wake of the mortgage crisis that surfaced in 2006, homebuilders have focused on the middle and upper-end of the housing market, where profits are greatest. That’s meant more expensive homes have come on the market, but not more homes overall. Indeed, new homes are priced at an extreme premium to existing ones, with high-end sales causing median housing prices to rise to a record $321,000 in April.

Too High
The median price for new homes has accelerated due to low supplies of affordable housing
Source: Census Bureau

In the first quarter of 2016, 26 percent of housing sales were for new homes priced over $400,000 -- up from 18 percent for the same quarter in 2013, according to Census Bureau data. Sales of more affordable homes have not recovered at the same pace, keeping a full recovery at bay.

home-price-May

While April’s housing numbers are a welcome sign, they still don’t mean that the economy finally has a solid foundation.

This column does not necessarily reflect the opinion of Bloomberg LP and its owners.

To contact the author of this story:
Rani Molla in New York at rmolla2@bloomberg.net

To contact the editor responsible for this story:
Timothy L. O'Brien at tobrien46@bloomberg.net