New Home Sales Plunge as Mortgage Rates and Prices Price Out Buyers

US new home sales slumped in April amid higher mortgage rates and prices, marking a measurable pullback in the housing market. The decline directly affects potential homebuyers facing steeper borrowing costs and home prices that continue to rise. This slowdown comes as affordability constraints tighten across the country, making homeownership less accessible for many Americans.

The housing market downturn arrives alongside broader economic pressures. US inflation increased at its fastest pace in three years in April, driven by higher energy prices amid the war with Iran. This surge in inflation has cemented economists' views that the Federal Reserve could hold interest rates unchanged well into the coming year.

Household finances are deteriorating under the weight of rising costs. Disposable income at the household level after adjusting for inflation dropped for a third straight month in April, other data showed Thursday. These declining real incomes make monthly mortgage payments increasingly burdensome for families already stretched by higher prices across the economy.

Americans are growing frustrated with Donald Trump's handling of the economy as the cost of living soars ahead of midterms. A Reuters/Ipsos survey last week showed the president's approval rating fell to nearly its lowest level since he returned to the White House, hit by a drop in support among Republicans. Trump won the 2024 presidential election in large part because of his promise to lower inflation, making the current price pressures a political liability.

The housing slowdown reflects wider economic softness across multiple sectors. US core capital goods orders fell in April, signaling weakness in business investment. Toyota sales dropped for a third consecutive month on declines in China and the Middle East, indicating that global demand pressures are affecting major manufacturers.