Sales of new homes are tumbling to pre-pandemic lows as inflation rises and mortgage rates climb, raising recession fears.

New home sales in April plummeted from just a month ago, dropping a whopping 16.6% to a seasonally adjusted annual rate of 591,000, according to a Tuesday report from the Census Bureau.

The number was far below what forecasters had expected and shows that the housing market is slowing faster than many might have anticipated. March featured a new home sales rate of 709,000. Some worry that the decline in home sales could be a sign the country is on the verge of a recession.

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“Plummeting new home sales is what we see at the start of most economic recessions and it will be a miracle if the country can avoid another recession coming its way,” said Chris Rupkey, FWDBONDS's chief economist. “This could be the first recession to be caused by consumers pulling back their spending due to sticker shock on the prices of everything everywhere.”

Mortgage rates have been on the rise as the Federal Reserve begins reversing the easy money policies it implemented about two years ago at the start of the COVID-19 pandemic.

As of Tuesday, the average 30-year fixed-rate mortgage was 5.36%, up more than 2 percentage points from a year before, according to Mortgage News Daily.

The Fed increased its interest rate target by a quarter of a percentage point in March and subsequently jacked up rates by a half percentage point earlier this month. The half-point hike is akin to two rate increases at once and signals that the Fed is increasingly worried about the country’s breakneck inflation. The last time the central bank took such an aggressive tack was more than two decades ago.

The meteoric rise in mortgage rates has made housing much less affordable for homebuyers.

As a result, the supply of new homes for sale shot up in May to 440,000, enough for nine months at the current sales rate. That's now well above normal, which is about four to six months of supply.

Tuesday’s report also found that the median new home price was up a colossal 19.6% for the 12 months ending in April to $450,600, a figure that outpaces most gauges of inflation.

Overall consumer prices increased by 8.3% in April on an annual basis, remaining near the highest level since the early 1980s.

Housing markets in the South are cooling at the fastest rate, with a nearly 20% drop in home sales from April of last year. The Northeast is the region of the country experiencing the lowest decline, 5.9%, according to data from the Census Bureau.

The effects of rising mortgage rates are particularly profound in certain metro areas around the country.

Austin, Texas, saw a huge influx of people in the past couple of years. While the median listing price in the Texas capital increased briskly, 9.4% of listings in April were registering price cuts, according to Realtor.com. That is a sign that demand is finally beginning to tumble in pandemic migration hot spots.

The housing market in parts of California is also starting to cool down. In the Sacramento area, 9.7% of listings featured price reductions in April, and in the Riverside area, 8.2% were discounted.

Sonia Guardado, a real estate agent based in the Austin area, told Bloomberg that she has had to start lowering prices as housing becomes more unaffordable. She noted that the real estate environment is changing quickly as mortgage rates rise.

“The month before, it was hot, hot, hot, with lines out the door, and now we can’t even get buyers in,” she said.

Sales of existing homes also tumbled last month as housing became less affordable across the country. April’s drop marked the third straight month of declines for existing homes.

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Existing home sales declined by 2.4% in April to a seasonally adjusted annual rate of 5.61 million, according to a report by the National Association of Realtors released last Friday. The median existing-home sales price increased at a year-over-year pace of 14.8% to $391,200.

“Higher home prices and sharply higher mortgage rates have reduced buyer activity,” said Lawrence Yun, NAR's chief economist. “It looks like more declines are imminent in the upcoming months, and we'll likely return to the pre-pandemic home sales activity after the remarkable surge over the past two years.”