The Census Bureau reported that March new home sales posted at a seasonally adjusted annual rate of 621,000 units. This was up 5.8 percent from revised February numbers and the third consecutive month of sales gains for new homes. Combined with the March rise in existing home sales it would appear the first quarter of 2017 has been net positive for home sales despite the backdrop of higher mortgage rates. Preliminary new home sales for March were up 15.6% year-over-year.
The average price of a new home contracted in March was $388,200, while the median price was $315,100. Both median and average prices were higher than a year ago. The supply of new homes stood at 5.2 months of inventory.
While the solid start to the year for home sales in encouraging, the remaining concern is that home prices are still outpacing wage gains by more than a factor of two. The recent Case-Shiller national home price index rose 5.8 percent in February, up from 5.6 percent in January.
The rise in March new home sales will no doubt be music to the ears of housing cheerleaders, as well it should. The problem is that many imbalances and distortions are still propping up the numbers. Most expect the gap between new home sales and existing home sales to close, but it’s probably going to take longer than anticipated because the Fed has so grossly distorted home prices, and asset prices in general. Closing the gap also depends on whether builders can actually bring more affordable (spelled less expensive) homes to market.
To put this solid March report for new home sales into proper perspective it helps to go back a few decades. From a longer-term view it’s much less impressive. We have the same rate of new home sales today in the United States that we had in 1971, only we have 120 million additional residents! That’s not exactly what I would call progress.
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