New Home Sales At 16-Month High in March but Prices Drop

By Mark Lieberman

Managing Director and Senior Economist

Highlights:

  • Pace of contracts for new home sales ROSE 4.5 percent in March to 692,000;
  • The unsold inventory of new homes SLIPPED 1,000 in March to 640,000;
  • The months’ supply of new homes for sale FELL to 6.0 in March from 6.3 in February;
  • Median price of a new home DROPPED $12,500, or 4.0 percent, from February to $302,700, the lowest since February 2017; Year-year the median price was off $32,700 or 9.7 percent;

Trends:

  • The number of contracts for the sale of new homes is at its highest level since November 2017;
  • The pace of new home sales has improved for three straight months for the first time in two years;
  • The year-year drop in the median price of a new home was fifth consecutive monthly decline;

Data Source: Census Bureau and Department of Housing and Urban Development

Image result for new home sales


The Census-HUD report on new homes (contracts for sale) offered some explanation for the steady optimism of home builders as sales rose for the third straight month in March.

But home builders, as the joke goes, may be making up for it in volume: the median price of a new home dropped $12,500, a staggering 4.0 percent decline. Housing economists will say watching month to month trends in home prices is misleading because of regional differences and different features in different homes. The preferred measure is year-year; ok the median price of a new home has fallen year-year for five straight months for the first time since May-September 2009, the depths of the Great Recession.

To be sure, mortgage rates have fallen: with the cost of a 30-year fixed rate loan averaging 4.27 percent in March down from 4.37 percent in February. The rate averaged 5.15 percent from May to September 2009.

The uptick in sales – actually contracts – could be a boon to retail suppliers for new homes. Sales at furniture stores, for example, improved in each of the last three months after dropping in the preceding three months. Sales at appliance store rose last month but fell in five of the previous six.

New homes represent less than 10 percent of home sales each month but have a disproportionate economic impact. While both transactions involve financial services, the building of a new home puts construction workers to work and involves the purchase of materials etc.

The National Association of Home Builders reported last week its Housing Market Index, often referred to as builder confidence, remained at a solid 63 in April (based on March since the survey is conducted in the first 10 days of the month). There had seemed to be no data supporting the solid showing but now there is with the sales improvement for each of the last three months.

The outlook could even be brighter if rates continue to drop but falling rates could cause some buyers to pause hoping for rates to drop further.

Meanwhile, the number of residential construction jobs increased 12,000 in March, according to the Bureau of Labor Statistics, to 2.9 million.

Hear Mark Lieberman on P.O.T.U.S. (Sirius-XM 124) Friday at 6:20 am Eastern Time. You can follow Mark Lieberman on Twitter at @foxeconomics.

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