Sales of new homes in the US bounced back broadly in March as an abundance of inventory helped drive prices lower.
New single-family home sales increased 8.8% to a 693,000 annual pace last month, the fastest since September, government data showed Tuesday. Sales rose in all four regions, and the rate of purchases exceeded most estimates in a Bloomberg survey of economists.
While the resale market is struggling with a lack of inventory, builders are stepping in to fill the void. The supply of new homes for purchase rose to 477,000 in the month, the highest since 2008. Of those, the number of completed homes jumped to the highest since 2010.
The report from the Commerce Department on Tuesday also showed the median sales price of a new house decreased 1.9% from a year ago to $430,700 in March.
“The willingness of the major homebuilders to utilize incentives such as price reductions, mortgage rate buy-downs and paying buyers closings costs continue to support a healthy pace of new home sales,” Gregg Logan, a managing director at RCLCO Real Estate Consulting, said in a note.
The figures indicate that sales have somewhat stabilized in recent months, though the data are volatile. Underlying demand remains strong, but buyers are still constrained by high mortgage rates and prices, which are limiting the extent to which the housing market can gain momentum.
Inflation has proved stubborn in recent months, calling into question not only when the Federal Reserve will cut interest rates in 2024, but if it will at all. Mortgage rates above 7% continue to plague existing-home sales, which are “stuck,” National Association of Realtors Chief Economist Lawrence Yun said last week.
Even though new-home construction slipped in March, residential investment is expected to contribute nearly half a point to US economic growth in the first quarter, according to the Atlanta Fed’s GDPNow forecast. The government will release its initial estimate of gross domestic product on Thursday, with the GDPNow projecting 2.9% growth.
New-home sales are seen as a more timely measurement than purchases of previously-owned homes, which are calculated when contracts close. However, the data are volatile. The government report showed 90% confidence that the change in new-home sales ranged from a 8.4% decline to a 26% gain.
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