New home sales are often a good barometer of the housing market because, if completed new homes aren’t moving, it probably means buyers are facing affordability constraints and market corrections are looming.
In March, sales of new single‐family homes fell 8.6% compared with February, to an annual rate of 763,000, according to estimates from the U.S. Census Bureau and the U.S. Department of Housing and Urban Development.
That’s down 12.6% compared with March 2021.
Regionally, and year-over-year, new home sales fell 9.2% in the Midwest and 13.9% in the South. However, new home sales were up 10.5% in the Northeast and 8.5% in the West.
Nationally, home prices have skyrocketed nearly 20% since March 2021, plus mortgage rates are now on the rise, creating affordability issues that are expected to slow home sales in the months to come.
According to the government’s data, the median sales price of new home sold in March was $436,700. The average sales price was $523,900.
Of course, limited inventory also continues to be an issue. As of the end of March, there were only about 407,000 new homes available in the U.S. – about a 6.4-month supply at the current sales rate.
“Growing affordability challenges are slowing new home sales and taking a toll on the housing market,” says Jerry Konter, chairman of the National Association of Home Builders (NAHB), in a statement. “Mortgage rates jumped nearly a full percentage point between the end of February and March and builders continue to face escalating construction and development costs which are putting upward pressure on new home prices.”
“Buyers are facing sticker shock due to deteriorating affordability conditions and a lack of existing home inventory,” adds Danushka Nanayakkara-Skillington, assistant vice president of forecasting and analysis for NAHB. “Only 14 percent of new home sales in March were priced below $300,000. A year ago, it was 34 percent.”