Mortgage Rates Are Up but New-Home Sales Still Solid in March
Despite higher interest rates during March, lack of existing home inventory drove a rise in new-home sales, the National Association of Home Builders' Eye On Housing reports. As far as inventory of newly built single-family homes goes, March saw inventory levels rise by 2.6% from February, which was a 10.2% year over year increase, while the median new-home sale price in March was $430,700—an increase of nearly 6% from February but a drop of 1.9% compared with a year ago.
During April, mortgage rates have risen above 7% and NAHB anticipates that will affect the pace of new-home sales this month, resulting in more moderate sales and more builders using sales incentives to attract buyers during the spring homebuying season.
Sales of newly built, single-family homes in March rose 8.8% to a 693,000 seasonally adjusted annual rate from a downwardly revised reading in February, according to newly released data from the U.S. Department of Housing and Urban Development and the U.S. Census Bureau. The pace of new-home sales in March is up 8.3% from a year earlier. Although consumer demand has been somewhat dampened due to higher interest rates, builders continue to supply new homes to the market to lift inventory to make up for the low resale supply.
Shelter inflation remains the largest, lingering obstacle for the challenge of lowering inflation. More housing supply will ultimately tame shelter inflation growth and lower interest rates, which in turn will improve the cost of financing for land developers and home builders, thus enabling more attainable housing supply.