New home sales in the United States plunged by nearly 17% in April, adding to the recent signs of weakness in the housing market. Leading real estate scholars have warned of a recession. Michael Berry, the protagonist of the movie “The Big Short”, made famous by shorting the subprime mortgage bubble. Burry), a cryptic tweet that deepened investor unease.
The U.S. housing market is showing signs of cooling. The Ministry of Commerce announced on Tuesday (24th) that new home sales in April fell 16.6% from March to a seasonally adjusted and annualized rate of 591,000 units, the largest drop since 2013, and the number of units since April 2020. The lowest, far worse than economists expected a drop of only 1.7% to 761,000.
Rising mortgage rates and soaring home prices are dampening demand. Not only did new home sales fall for the fourth straight month, the U.S. homebuilder confidence index fell the most since the outbreak, and last week’s April existing home sales fell to a two-year low, while new home starts and building permits fell.
Robert Dietz, a leading real estate scholar and chief economist at the National Association of Home Builders (NAHB), warned that the slump in new home sales “is a clear recession warning for the U.S. economy in the coming quarters,” and it also means that more and more potential Buyers are being pushed out of the market.
According to Freddie Mac, the average 30-year fixed-rate mortgage in the United States has surpassed 5% for the first time since 2011. As of last week, it reported 5.25%, representing a year-to-date climb of more than 2 percentage points.
On the day when the housing market was sluggish and U.S. stocks tumbled, Berry, who became famous in the short-selling market, stirred investors’ nerves with a tweet. “As I said in 2008, it’s like watching a plane crash. It hurts, it’s not fun, I can’t laugh,” he said.
Berry, however, did not respond to questions from numerous Twitter users whether he thought a financial meltdown on a scale comparable to the 2008 financial tsunami was brewing.