Before last month, sales had risen for three-consecutive months.
New home sales have been like a yo-yo the last two months, dropping more than 11 percent in April.
This month's drop in home sales and the stagnation in new home inventory will continue to exacerbate the national inventory shortage which will result in even higher prices and lower affordability.
Sales of newly built, single-family homes in April dropped for the first time in 2017, falling 11.4% to a seasonally adjusted annual rate of 569,000 units, according to newly released data by the U.S. Department of Housing and Urban Development and the U.S. Census Bureau.
New home sales have rebounded steadily since the sharp fall in December, and other housing market indicators also imply a stable rebound in the housing sector, although momentum is expected to slow slightly from the solid first quarter prints, noted Barclays in a research report. Builders are focusing on the mid- to upper-price ranges, which is reflected in the lack of affordable new homes on the market.
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USA stocks further trimmed gains after the data on Tuesday while prices of US government debt were mostly trading higher.
Sales in the West fell by 26.3%, the most since October 2010. They fell 4.0 percent in the South and declined 13.1 percent in the Midwest.
There were 268,000 new homes for sale in April, the most since July 2009. Still, new housing stock remains less than half of what it was at its peak during the housing boom in 2006.
At the current sales pace, there was a 5.7 months supply of new homes on the market in April.