New single family homes sales are on the rise, right now, and on their way to their highest marker in more than a year. Indeed, the numbers from March seem to suggest that lower mortgage rates and a drop in home prices have bolstered a buyer’s market through March. More important, perhaps, the United States Department of Commerce reported, on Tuesday, that this is the third straight month of increases, suggesting that it might be a sign of recovery in the housing market.
Realtor.com chief economist Danielle Hale comments, “In this housing market, affordability for buyers is key. This trend supports the fact that lower mortgage rates have started to entice buyers this spring and foreshadows a potential strengthening of existing home sales in the months to come.”
Looking directly at the numbers, then, new home sales grew 4.5 percent last month, to a seasonally adjusted annual rate of 692,000 units. This is the highest level for this metric since November of 2017.
It is also important to consider the fact that February’s sales pace was downwardly revised. It had originally been reported at 667,000 units but considerably revised to 662,000 units. In addition, economists had forecast new home sales—which account for nearly 12 percent of the whole housing market—fell 2.5 percent to a pace of 650,000 last month.
Also, the median price for a new [single family] home in March dropped 9.7 percent to $302,700 over the year before. This is the lowest such measure since February of 2017. However, a separate report from the Federal Housing Finance Agency, released on Tuesday, indicates that the house price index grew to a seasonally adjusted annual rate of 4.9 percent, in February. These numbers come after a 5.6 percent in January.
Finally, new home sales appear to have been unaffected by the recent supply problems that have bogged down the market for older/previously-owned homes. Actually, another report—issued on Monday—indicates that home resales fell somewhat dramatically in March, mostly dragged down by a consistently lower prices.
However, even with these bigger, broader supply struggles in the housing market, housing market fundamentals are doing better. For one, the 30-year fixed mortgage rate has fallen nearly 80 points since November. Also, house price inflation continues to slow at a time when wage growth is escalating.