US new home sales rose in April on a month-on-month basis, but the pace fell short of the 0.67M market expectation. The reported figure was 622M, pointing to weaker-than-anticipated turnover in the primary housing market as the spring selling season progressed.
The data set the actual release against the forecast, with 622M coming in below 0.67M. The miss suggests demand was less robust than consensus had pencilled in for April, even as new-build transactions continued to advance on a monthly basis.
Fed Policy Expectations and Market Positioning
We note that April’s new home sales figure of 622,000 missed the forecast, pointing to continued cooling in the housing sector. This miss reinforces our view that the Federal Reserve will be pressured to pivot towards a more dovish monetary policy. The market is now pricing in a higher probability of a rate cut before the end of the year.
With 30-year mortgage rates holding firm around 6.8% this month, housing affordability remains a significant headwind. This soft housing data, combined with a slight uptick in weekly jobless claims to 225,000 last week, solidifies the slowing economic narrative. Consequently, we are looking at adding to long positions in September 2026 SOFR futures contracts, anticipating the market will price in a cut more aggressively.
Homebuilder Impact and Trading Strategy
The weakness is being felt directly by homebuilders, and we expect their upcoming earnings guidance to reflect this slowdown. Historically, during periods of rapidly rising interest rates like we saw in 2022, homebuilder stocks underperformed until a clear Fed pivot was imminent. We see an opportunity here to buy out-of-the-money put options on the XHB ETF with July expirations as a hedge against further downside in the sector.
