Lower mortgage rates and limited existing inventory helped to push new home sales up in March, even as builders continue to grapple with increased construction costs and material supply disruptions.
Sales of newly built, single-family homes in March increased 9.6% to a 683,000 seasonally adjusted annual rate from a downwardly revised reading in February, according to newly released data by the U.S. Department of Housing and Urban Development and the U.S. Census Bureau.
“A lack of resale inventory combined with many builders offering price incentives helped to push new home sales higher in March,” said Alicia Huey, chairman of the National Association of Home Builders and a builder and developer from Birmingham, Ala. “However, sales are down 3.4% compared to a year ago because of the shortage of electrical transformer equipment and building material price volatility.”
“The average Freddie Mac mortgage rate gradually fell from near 6.7% at the beginning of March to 6.3% at the end of the month, and this helped to push new home sales higher in March,” said Danushka Nanayakkara-Skillington, NAHB’s assistant vice president for forecasting and analysis.
A new home sale occurs when a sales contract is signed or a deposit is accepted. The home can be in any stage of construction: not yet started, under construction or completed. In addition to adjusting for seasonal effects, the March reading of 683,000 units is the number of homes that would sell if this pace continued for the next 12 months.
New single-family home inventory fell 9.5% in March, however, it remained elevated at a 7.6 months’ supply at the current building pace. A measure near a 6 months’ supply is considered balanced. Completed, ready-to-occupy inventory stood at 70,000 homes in March and is up 119% from a year ago. However, that inventory type remains just 16% of total inventory. Total new home inventory peaked in October at 466,000 and has been declining since that time, with a total inventory of 432,000 available for sale in March.
The median new home sale price rose in March to $449,800, up 3.2% compared to a year ago. Elevated costs of construction have contributed to a rise in home prices.
Regionally, on a year-to-date basis, new home sales rose 1.7% in the Northeast, but fell 19.6% in the Midwest, 5.8% in the South and 32.2% in the West.