Sales of new homes jumped 8.8 percent to a seasonally adjusted annual rate of 693,000 in March, the highest rate of sales since September of last year.
Economists had expected a rate of 670,000. The numbers are reported at an annual rate, which means they refer to how many houses would be built over the next 12 months if builders kept up the same pace throughout the year.
Over the past decade, the annual rate has averaged 636,000. At the pandemic/Black Lives Matter riot peak of new homes sales in August of 2020, when many Americans were rushing to buy homes outside of crowded and violent mostly peaceful urban centers, the rate reached 1.03 million. The recent low of 543,000 came in June of 2022, shortly after the Federal Reserve began raising interest rates.
The all-time high was hit during the housing bubble in June 2005, when new home sales hit nearly 1.4 million.
The median sales price of new houses sold was $430,700, a 5.93 percent rise from February. The average sales price was $524,800, 7.4 percent above the February average price.
The seasonally‐adjusted estimate of new houses for sale at the end of March was 477,000, a 2.5 percent increase from the prior month. This represents a supply of 8.3 months at the current sales rate, well above the four to six month supply real estate professionals consider normal.
New home sales and residential construction have been boosted by a lack of supply of existing homes on the market. With interest rates considerably higher than they were a few years ago, most homeowners have mortgages with significantly lower rates than they could get if they sold their current home and bought a new one. As a result, many owners who would likely be sellers are deciding to stay put.
Although new home sales are a small part of the overall housing market, they have outsized economic weight. Homebuilding is labor intensive and employs workers from up and down the skills ladder. New homes typically get outfitted with new appliances and furniture, driving even more economic activity.
The rise of new home sales in reaction to rising interest rates was unforeseen by most economists, including those at the Federal Reserve. Typically, higher interest rates are seen as weighing down the housing sector, leading to lower employment and lower demand for goods and services needed for new homes.
Somewhat offsetting the strong rise in March, the sales numbers for the previous three months were revised down. The February sales rate was revised to 637,000 from the preliminary estimate of 662,000.