New Home Sales Jumped in March
New home sales in March came in at 692,000, a 4.5% increase after being revised down for the previous three months. That marks the strongest pace since November 2017 and is up 3% from a year ago. It contrasts with the drop in existing home sales. New home sales provide a better indicator of what is to come in the months ahead, as they are counted the minute a bid comes in. Existing home sales are not counted until closing.
Indeed, we were expecting to see an uptick in total home sales as mortgage applications surged in March and early April. Fence sitters scrambled to take advantage of a temporary drop in mortgage rates when the Federal Reserve stepped to the sidelines during their meetings in January and March.
Gains were broad-based with the exception of the Northeast. Realtors are beginning to complain that changes to the tax laws, which limit state and local real estate tax deductions, are curbing sales of more expensive homes. The one-million-dollar-and-over market went from booming to deep declines over the last year.
The median sales price in March was $302,700, down nearly 10% from a year ago. That reflects the push by builders to move downscale. There were also reports of discounting after some builders found themselves with an overhang of speculative building at the start of the year. The fastest growth in sales remained in $299,999 and under range. That is in line with the increasing demand in the entry-level market, since baby boomers and foreign buyers are not investing as much in housing. The inventory of new houses for sale reached an estimated six months’ supply.
Gains in new home sales suggest an additional uptick in existing sales later this spring. The level of sales we are seeing is still extremely low, given household formation and the underlying demand by first-time buyers. Look for sales to slow again after this spurt.
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