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  • Writer's pictureRealFacts Editorial Team

Despite Higher Mortgage Rates, New Home Sales Post Solid Gain in March

Residential street of homes

Despite the uptick in mortgage rates, new home sales in March posted a solid gain, fueled by a limited inventory of existing homes. However, the momentum is expected to moderate in April as mortgage rates surged above 7% this month, potentially affecting sales and prompting increased use of builder sales incentives.

According to data released by the U.S. Department of Housing and Urban Development and the U.S. Census Bureau, sales of newly built, single-family homes in March rose by 8.8% to a seasonally adjusted annual rate of 693,000 units, following a downwardly revised reading in February. This pace marks an 8.3% increase from a year earlier.

Carl Harris, chairman of the National Association of Home Builders (NAHB), noted that while consumer demand has been somewhat affected by higher interest rates, builders are still working to bolster inventory due to the scarcity of resale homes. However, with rates surpassing 7%, some buyers may hesitate, impacting sales in the coming months.

Despite the increase in sales, new single-family home inventory remained elevated at 477,000 units in March, up 2.6% from February. This translates to an 8.3 months supply at the current building pace, driven by the ongoing shortage of resale homes. In comparison, existing single-family homes had only a 3.1 months’ supply in March, well below the balanced market threshold of 5 to 6 months’ supply. Year-over-year, new home inventory increased by 10.2%.

The median new home sale price in March was $430,700, a nearly 6% increase from February, though down 1.9% from a year ago.

Regionally, new home sales showed varying trends. On a year-to-date basis, sales rose by 15.1% in the Northeast, 17.8% in the Midwest, and 28.1% in the West. However, sales declined by 6.6% in the South.

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