First-quarter new-home sales revised upward, but March figures take tumble

New single-family home sales in March came in at a seasonally adjusted annual rate of 763,000, a stark 8.6% drop from February’s pace, according to the U.S. Census Bureau and the U.S. Department of Housing and Urban Development.

Headwinds from rising interest rates, rapid home-price increases, rampant inflation, low supply and geopolitical uncertainty all converged during the month to further weaken affordability and hold down sales. Economists polled by Reuters forecast an annualized pace of 765,000 units, indicating that even with dampened expectations, the March figures were disappointing. Sales estimates for the prior three months, however, received an upward revision and rose by a cumulative 131,000 new units.

The new-home sales plunge between February and March was driven largely by a 10.2% decrease in deals in the South. This region accounts for an outsized share of all U.S. new-home sales (last year, 59% of all such activities were in the South), and thus far in 2022, sales there are 13.5% off the pace they set last year.

For-sale inventory continues to be problematic on a nationwide basis, although the number of new homes available for sale grew by the end of March. This number stood at 407,000 homes, up 3.8% from the previous month and equating to a supply of 6.4 months at the current sales pace.

But this available-for-sale figure includes homes that either have yet to start construction or are currently being built. Both categories continue to be stalled by persistent shortages of building materials, which have prolonged the timetable for new-home completions. The supply of finished new homes available for sale is currently at 35,000 units, which is hovering near an all-time low.

Material-input woes also continue to help drive new-home prices upward. The median price of a new home in March grew 3.6% month over month and 21.4% year over year, reaching $436,700.


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