According to the Census Bureau new home sales for March posted at a seasonally adjusted annual rate of 692,000, a 3 percent increase from the same time last year and 4.5 percent better than February sales numbers. Apparently the big drop in mortgage interest rates continued to provide some lift to the new home market in March. This confirms what we were seeing in the DFW market last month as new home sales outperformed the resale market. The supply of new homes stood at 5.0 months in March, up from 4.5 months a year ago.
Another thing that helped was a big drop in the price of new homes. The median price of a new home sold (contracted) in March fell from $335,400 last year to $302,700 in March 2019. That’s a 9.7 percent drop in the median price compared to last year. One of the key questions going forward is how well builders are able to adjust their product mix toward lower priced homes. So far builders are doing a decent job keeping pace with buyer demand geared toward affordable homes. If median prices remain in check, new home sales may continue to improve. If builders try to push more expensive luxury homes, it is likely that sales will falter again as the economy continues to stagnate.
While March numbers were positive for new home sales, previous months sales were revised lower. December 2018 sales were lowered all the way down to 562,000 units (SAAR). It will be interesting to see how new home sales fare during April since mortgage interest rates have been creeping higher all month. March numbers for existing home sales were not very impressive, indicating that the stimulus from lower mortgage rates may have already run its course.
As a reminder, the Census counts a new home “sale” at the time of contract signing. That doesn’t mean it has closed. When I report new home sales for the DFW area, I am looking at actual closed transactions in the MLS.
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