New-home sales reached a seasonally adjusted annual rate of 693,000 in March, according to data published Tuesday by the U.S. Census Bureau and the U.S. Department of Housing and Urban Development (HUD). This figure represents an 8.8% increase from the revised February rate of 637,000 sales, and it also marks an 8.3% rise from the March 2023 pace of 649,000 units sold.
“The new home market has been an outsized share of the housing inventory, so homebuilders have been able to attract prospective homebuyers who are seeing very limited supply in the existing home market,” Bright MLS chief economist Lisa Sturtevant said in a statement.
“Some builders have been able to pivot to meet demand by building smaller homes. Many homebuilders are also able to offer concessions and rate buydowns to make a new home purchase more attractive. According to the March data, however, builders are not slashing prices.”
In spite of the strong results in March, homebuilder sentiment stalled in April on the back of elevated mortgage rates and a stronger-than-expected inflation reading. Mortgage applications for new homes also stagnated in March as buyers felt the brunt of sustained home price growth. Applications for new-home purchases rose only 1% from February to March.
At the end of March, there were 477,000 new homes available for sale. At the current sales pace, there is an 8.3-month supply of new single-family homes, according to census and HUD data.
The median sale price for a new home rose to $430,700 in March, up 6% from a year ago. Meanwhile, the median price of an existing home sold last month was $393,500, meaning that new homes are still selling for nearly 10% more than existing homes.
According to Sturtevant, it would take two main factors to take some of the wind out of the new home market: a significant increase in the supply of existing homes and a significant decline in demand prompted by a weakening of the labor market.
“The labor market has been surprisingly resilient over the past couple of years,” Sturtevant said. “The jobs numbers are impressive and unemployment remains low. Despite those positive metrics, there are signs that workers are feeling a little less certain, as the job turnover rate has moderated.
“Housing demand may weaken as we head into summer — especially as mortgage rates remain elevated. However, the bigger story is about supply — not demand. With more existing homes coming onto the market, homebuilders may see less traffic later this spring and into the summer.”
CoreLogic chief economist Selma Hepp echoed similar thoughts in prepared remarks.
“New home sales continue to be a bright spot in the housing industry,” Hepp said. “Homebuilder confidence and buying incentives are helping to counterbalance high values and interest rates. However, compared to years in the past, new home sales still aren’t performing as well as necessary to help reduce the high demand for new homes in the near term.”
