New home sales for single-family houses rose 4 percent in March, according to the latest data released by the Census Bureau [1] and the U.S. Department of Housing and Urban Development [2] on Tuesday.
The data [3] indicated that 694,000 new single-family homes were sold in March compared to 667,000 in the prior month. Sales of new homes rose on a year-over-year basis too, recording an 8.8 percent increase over the 638,000 homes sold in March 2017.
According to Tian Liu, Chief Economist at Genworth Mortgage Insurance [4] a high demand for younger home buyers fueled the sale of new homes in March. “Demand from younger homebuyers is especially strong, and strong home price growth has provided a favorable environment for pricing,” Liu said.
Apart from rising demand from younger homebuyers, an average weak price was one of the key factors that fueled the rise in sales. “Prices have weakened as high priced homes are back down to 16 percent of sales, the lowest since October,” said Tendayi Kapfidze, Chief Economist at LendingTree [5]. “In December sales above $500,000 were 24 percent of sales, the highest proportion since the sales price breakout began in 2002. This was due to buyers purchasing in anticipation of the tax plan curtailing the mortgage deduction on high balance mortgages.”
The data also showed differences in how regional markets performed. While the West and Southwest showed a jump in sales, the Northeastern region showed very weak sales activity. “Sales fell 54.8 percent in the Northeast to the lowest level since April 2015. The monthly decline was the third largest on record since the series began in 1973,” Kapfidze said. “While the weather was unfavorable, it is not a sufficient explanation for the decrease which is likely a data problem.”
“We expect new home sales activity to remain strong, especially along the west coast and in the Southwest, which has seen significant homebuilding activities in the past few months,” Liu said.
According to the data, the sale inventory for new homes at the end of March was at 301,000 representing a supply of 5.2 months at the current sales rate. But will this be enough to keep home sales on their upward trajectory? “The question is how fast can home builders build to meet the demand, and whether there is more focus on affordable homes,” Liu said.
“An increase of 28.3 percent month over month brought sales in the West to the highest level since December 2006. Low inventory is a particular challenge in the West and continuation of this trend would be encouraging,” Kapfidze said.