New home sales rose in March, climbing for the fourth month in a row as mortgage rates eased and buyers looked to new construction as an alternative to the tight inventory of existing homes for sale.
Sales of newly constructed homes were up 9.6% in March from February, but were down 3.4% from a year ago, according to a joint report from the US Department of Housing and Urban Development and the US Census Bureau. March’s month-over-month gain is further evidence that the housing market may be stabilizing.
Sales of new single‐family houses were at a seasonally adjusted annual rate of 683,000, up from a revised 623,000 in February. Sales were down from last year’s estimated rate of 707,000.
After climbing through much of February, mortgage rates were as high as 6.73% March. But as uncertainty moved through the financial industry due to bank failures in mid-March, rates fell during the rest of the month, according to the weekly average rate from Freddie Mac. This drop in rates brought an increase in mortgage applications.
In a bit of a setback for buyers, prices of new homes rose from February, the report showed. The median price for a new home rose to $449,800 in March, up from $438,200 the previous month.
Inventory of new homes available to buy dropped a bit from February. At the end of March, the seasonally adjusted estimate of new houses for sale was 432,000, down from 436,000 at the end of February. This is a supply of 7.6 months at the current sales pace, down from 8.2 months of supply last month.
“Buyers have begun to adjust to the elevated mortgage rate levels, especially in areas where home prices have adjusted downwards to compensate,” said Kelly Mangold of RCLCO Real Estate Consulting. “Despite signs of economic uncertainty in March, which included news of bank failures, buyers are still showing demand for new homes.”
She said there is a group of buyers who would have preferred to have bought a home already and are now deciding to buy following an extra year or two of saving up, all while adjusting their expectations.
“Demographic drivers remain strong as more households move into family years, and remote and hybrid work continue to have a foothold in many industries, driving buyers to seek space for extra bedrooms and/or office space in their homes,” said Mangold.