Mortgage rates that averaged above 7% since mid-April per Freddie Mac data acted as a drag on new home sales last month.

Sales of newly built, single-family homes in April fell 4.7% to a 634,000 seasonally adjusted annual rate from a downwardly revised reading in March, according to newly released data from the U.S. Department of Housing and Urban Development and the U.S. Census Bureau. The pace of new home sales in April is down 7.7% from a year earlier.

“The last four weeks mortgage rates have been above 7% and this is clearly causing many potential home buyers to sit on the fence,” said Carl Harris, chairman of the National Association of Home Builders (NAHB) and a custom home builder from Wichita, Kan. “However, in the weeks and months ahead, we expect mortgage rates to fall below 7%. Moderating rates, along with a dearth of existing inventory, should help new home sales recover as new construction will be needed to meet the demand for homes, especially during this crucial spring/summer season.”

“A lack of homes in the resale market combined with softening of the median new home price should incentivize home buyers to turn to new construction in the coming months,” said Danushka Nanayakkara-Skillington, NAHB’s assistant vice president for forecasting and analysis.

A new home sale occurs when a sales contract is signed, or a deposit is accepted. The home can be in any stage of construction: not yet started, under construction or completed. In addition to adjusting for seasonal effects, the April reading of 634,000 units is the number of homes that would sell if this pace continued for the next 12 months.

New single-family home inventory in April remained elevated at a level of 480,000, up 12.1% compared to a year ago. This represents an 9.1 months’ supply at the current building pace, which has been supported by the ongoing shortage of resale homes. Completed, ready to occupy inventory (97,000 homes in April) is up 42.6% from a year ago. However, that inventory type remains 20% of total inventory.

The median new home sale price in April was $433,500, down 1.4% from March, and up 3.9% compared to a year ago.

Regionally, on a year-to-date basis, new home sales are up 22.4% in the Northeast, 22.3% in the Midwest and 14.0% in the West. New home sales are down 10.5% in the South.