New Home Sales, commonly referred to as “new residential sales,” is an economic indicator that tracks the sale of newly constructed residences. It is extensively watched by investors since it is seen as a lagging signal of real estate market demand and, thus, a factor influencing mortgage rates. Household income, unemployment, and interest rates are all variables that influence it.
The United States Census Bureau releases two versions of the New Home Sales metric: a seasonally adjusted figure and an unadjusted one. The adjusted value is shown as a yearly total, whereas the unadjusted figure is presented as a monthly total. These numbers are provided for several areas and the entire nation.
New home sales are completed when a sales contract or deposit is signed or accepted. In any stage of construction, the home might be: not yet started, in the process of being built or fully finished. About 10% of the US housing market is made up of new house sales. Preliminary numbers for new single-family home sales are subject to major changes because they are mostly based on data from construction permits.
Insights into Monthly New Residential Sales, March 2024
If you're looking to buy a home, you might be surprised to learn that sales of newly built single-family homes in the United States actually jumped in March, even though mortgage rates remained elevated. This is according to government figures released recently.
Here's a breakdown of the key takeaways:
- Sales Up, Expectations Beat: According to the Commerce Department's Census Bureau, new home sales soared 8.8% in March to a seasonally adjusted annual rate of 693,000 units. This handily exceeded economist predictions of 670,000 and marked the strongest monthly increase since December 2022.
- Nationwide Rise: The good news wasn't limited to one region. Sales of new homes increased across the entire country, with the Northeast experiencing the most significant jump at a robust 27.8% from February.
- Existing Home Slump: Interestingly, this surge came at the same time that sales of existing homes, which make up the majority of the market, took a tumble. Existing home sales fell 4.3% in March, marking the sharpest drop in over a year.
What's Driving the New Home Sales Trend?
So, why the unexpected jump in new home sales despite rising mortgage rates? A few factors seem to be at play:
- Limited Resale Options: While existing home prices have come down slightly this year, potential buyers are still facing a limited selection of resale homes. Many homeowners who locked in fantastically low mortgage rates before the Federal Reserve's hikes are likely reluctant to sell and give up those rates.
- New Home Incentives: Builders are stepping up with enticing offers to attract buyers in this competitive market. These incentives include price reductions, help with mortgage rates, and even covering closing costs for buyers.
- Persistent Inventory Shortage: There's simply not enough housing supply to meet current demand. This lack of inventory creates a situation where new homes become more attractive options for some buyers.
Is the Market Cooling Down?
While March's new home sales numbers were positive, it's important to note that the broader housing market seems to be showing signs of a slowdown. Here's what we're seeing:
- Existing Home Sales Dip: As mentioned earlier, existing home sales dropped in March.
- Construction & Permits Down: Residential construction also dipped in March, with building permits showing a similar decline.
- Builder Sentiment Flattens: While builder sentiment remains steady, it hasn't grown in recent months, suggesting some cautiousness in the industry.
The Bottom Line
The housing market is a complex beast, and trying to predict its every move can be tricky. While March saw a surprising surge in new home sales, other indicators suggest a potential cooling off period. The key for buyers right now is to carefully consider their options. If you're house hunting, it's wise to factor in not just the purchase price, but also the ongoing cost of ownership, including property taxes and, of course, mortgage rates.
New Home Sales Trend [Previous Months]
Here's the region-wise tabular data for new home sales from February 2023 to February 2024. The units displayed are in thousands and are the seasonally adjusted annual rate. The data estimates only include new single-family residential structures. Sales of multi-family units are excluded from these statistics.
NORTHEAST: Connecticut, Maine, Massachusetts New Hampshire New Jersey New York Pennsylvania Rhode Island Vermont
MIDWEST: Illinois, Iowa, Indiana, Kansas, Michigan, Minnesota, Missouri, Nebraska North Dakota Wisconsin South Dakota Ohio
SOUTH: West Virginia, Virginia, Texas, Tennessee, South Carolina, Oklahoma, North Carolina, Mississippi, Maryland, Louisiana, Kentucky, Georgia, Florida, Alabama, Delaware, District of Columbia, Arkansas
WEST: Alaska, Arizona, California, Colorado, Hawaii, Idaho, Montana, Nevada, New Mexico, Oregon, Utah, Washington, Wyoming
Sources
- https://www.census.gov/
- https://www.census.gov/construction/nrs/pdf/newressales.pdf
- https://www.mortgagenewsdaily.com/data/new-home-sales
- https://www.nahb.org/news-and-economics/housing-economics/national-statistics/new-and-existing-home-sales-reports