An underwhelming first two months of the year in new home sales finally gave way to a March rebound, with sales up 8.8% above February’s downwardly revised pace.
That’s according to the newest data from the U.S. Census Bureau and the Department of Housing and Urban Development, which reported that sales of new single-family houses in March came in at a seasonally adjusted annual rate of 693,000 units.
New home sales were also up year over year, jumping 8.3% above the 640,000-unit from March 2023.
New home sales have seen a particularly inverse correlation with existing home sales of late, with resales gaining steam to start the first quarter while deals on newly constructed homes have lost momentum. The two subsectors have been on divergent tracks of late, with the supply of previously owned homes still beset by a persistent shortage and the ongoing affordability crisis holding back resales and driving buyers toward new homes. Subsiding rates had breathed some life to the existing home sales picture through February, but with average mortgage rates recently eclipsing 7% again and existing inventory still low, the needle may be swinging toward new homes once more.
Carl Harris, chairman of the National Association of Home Builders (NAHB), noted that the ongoing injection of product that builders have been providing the market has buoyed sales even as the rate environment has resumed rising.
“Although consumer demand has been somewhat dampened due to higher interest rates, builders continue to supply new homes to the market to lift inventory to make up for the low resale supply,” Harris said. “Rates moving above 7% however, will move some home buyers to the sidelines as the spring progresses.”
Indeed, the number of new homes for sale to close March grew from 465,000 to 477,000. That marks an eight straight month-over-month climb in new home supply, although months of supply in March receded from 8.8 to 8.3 because of the increase in sales pace.
Notably, while homebuilders’ agility on offering price cuts and other incentives to offset affordability woes has been a large contributor to the rise of new home sales over the past 12 months, it appears that fewer builders are electing to dip into that well to weather recent rate fluctuations. Just 24% of builders reported offering a price cut in March, down from 36% in December. That decline in part accounts for the jump in new home sale median price, which grew to $430,700 in March. That’s up 6% from February and is down only 1.9% on an annual basis, reaching its highest level in seven months.
