New home sales jumped in March

April 23, 2024

New home sales, which are recorded at the contract signing and reflect more recent sales, jumped 8.8% in March; February sales were revised lower. All regions captured increased sales for the month. The spring home buying season has kicked off but is being hampered by low supply and the highest mortgage rates since November.

Builders are benefiting from tight supply in the resale market; however, they cannot ramp up fast enough to meet demand. The median sales price of a newly built home ticked up in April. New construction tends to sell at a premium, but that gap has narrowed in recent months as builders attempt to pivot to smaller, more entry-level homes. They are also able to offer mortgage rate buydowns to help lure in buyers. Incentives work: Sales were 8.3% higher in March than a year ago.

The 30-year fixed mortgage rate jumped to 7.1% in mid-April after flirting with 7% during all of March. That points to slower sales activity to come, as many sidelined buyers are waiting for rates to fall. Mortgage applications had been rising slightly before rates hit their new 2024 highs; both refinancing and new purchase mortgage applications remain a fraction of their pre-pandemic averages.

Separately, existing home sales, which are recorded at the contract closing and reflect activity from a few months prior, slumped 4.3% in March and fell 3.7% from a year ago. Supply remains tight but has increased slightly from recent lows. There are 1.1 million homes for sale in the resale market, while the median sales price has ticked up to $393,500, the highest since August of last year. Many would-be buyers are still priced out.