New-home sales up nearly 9%, boosted by strength in the Northeast
The numbers: Sales of newly built homes in the U.S. rose in March, posting the biggest increase since December 2022.
Home buyers snapped up new homes, pushing sales to the highest level since September 2023, just before the 30-year mortgage rate began its trek to 7%.
U.S. new-home sales rose 8.8% to an annual rate of 693,000 in March, from a revised 637,000 in the prior month, the Commerce Department reported Tuesday.
The number is seasonally adjusted and refers to how many homes would be built over an entire year if builders continued at the same pace each month.
The pace exceeded expectations on Wall Street. Economists had forecast new-home sales to total 669,000 in March.
The rate of new-home sales was boosted by strength in the Northeast, where sales rose 28%.
The data from February was revised. New-home sales fell a revised 5.1% in February, compared with the initial estimate of a 0.3% drop.
New-home sales data are volatile month over month and are often revised.
Key details: The median sales price of a new home sold in March rose to $430,700 from $400,500 in the prior month.
The supply of new homes for sale fell 5.7% between February and March.
New home sales rose in all regions, led by the Northeast. The weakest region, relatively speaking, was the Midwest where new-home sales only rose 5.3%.
Overall, sales of new homes are up 8.3% compared to last year.
Big picture: Home builders continue to enjoy strong demand from home buyers, driven by an ongoing lack of home listings due to the lock-in effect.
But with 7% mortgage rates making a comeback, it’s unclear how long this strength will last. And builders, anticipating weaker demand, have already begun to scale back on constructing new homes in March, possibly due to higher borrowing costs for both buyers and their businesses.
Nonetheless, builders are still relatively confident about the market, since the U.S. is still facing a shortfall of homes due to the lock-in effect that’s keeping a lid on home-resale activity.
And builders, unlike current homeowners, have various additional tools at their disposal that could help offset high rates and keep potential new home buyers interested.
These include sales incentives, like cutting home prices, or offering mortgage-rate buydowns. That’s an arrangement where the builder uses their money to temporarily or permanently pay more to the mortgage company to bring the rate down.
What are they saying? “It is encouraging that new home sales rose by such a large margin in March, despite mortgage rates hovering around 7% for most of the same month,” Thomas Ryan, property economist at Capital Economics, wrote in a note.
“Given the lack of new single-family inventory currently available on the market, demand for new homes should be robust. The upshot is we expect new home sales to reach 825,000 annualized by end-2026, higher than they were at any point post-GFC barring a brief pandemic spike,” he added.
Source: marketwatch.com
