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New Home Sales Plummet, Sparking Recession Fears

Photo by Brandon Bell/Getty Images

Sarah Weaver Staff Writer
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Sales of new homes fell 16.6% in the last month as rising interest rates reduce the possibility of home ownership for many families.

Interest rates have risen to 5.25% as of this week, up from 3.1% at the start of the year, the Wall Street Journal (WSJ) reported.

This month’s drop of sales in new homes is the biggest drop in a month since 2013, the outlet noted. (RELATED: ANALYSIS: Wall Street Wants To Take Over Your Home)

“The entry-level consumer, which is the largest buyer group, is moving to the sidelines,” Margaret Whelan, chief executive of Whelan Advisory, told the WSJ.

Home prices have rose by 18.8% last year, according to the S&P CoreLogic Case-Shiller National Home Price Index, a method of measuring average home prices in major metropolitan areas, the WSJ reported. Fewer home buyers are first time buyers, down to 27% in January of this year down from 33% the year before, the National Association of Realtors stated, according to the WSJ. (RELATED: After Falling Back To Earth, Lumber Prices Skyrocket Again)

Home prices are continuing to rise, despite the Fed’s increasing interest rates. A February poll of 33 property analysts estimated U.S. housing prices rising by 10.3% this year, Reuters reported. Home prices rose to a median price of $375,000 in March of this year.