By Gregory Heym, BHS Chief Economist and and host of Crossing The Line
While "tariffmania" is still monopolizing the headlines these days, this week our focus is on housing.
Let's start with the latest on existing home sales.
Existing Home Sales Down 5.9% in March
Not the happiest way to start a column, but this shouldn’t be a big surprise because:
- Most of the contracts for these closings were likely signed in January and February when mortgage rates were elevated.
- February existing home sales were much higher than expected, so an adjustment was inevitable.
Higher rates and an abnormally high figure the prior month will typically lead to disappointing home sales, and this was no exception. Affordability remains the biggest impediment for buyers, with prices up 2.7% over the past year on top of the increase in mortgage rates.
Other interesting findings of NAR’s report included:
- While up 20% over the past year, inventory remains at just a 4.0-month supply. Any number under 5 indicates a seller’s market.
- 26% of March closings were cash sales, down from 32% the previous month.
- First-time buyers were responsible for 32% of all sales.
As they say around New Year’s, “Ring out the old, ring in the new.” So let’s move on to new home sales.
New Home Sales Rose More than Expected in March
New home sales—which are counted when contracts are signed—rose 7.4% last month to an annual rate of 724,000 units. This figure was much higher than the Reuters forecast of a 680,000-unit pace, and the highest level since September 2024.
Here are some other highlights of the report:
- The median price of a new home was $403,600 in March, 1.9% lower than February, and 7.5% lower than a year ago.
- At the current pace of sales, the supply of new homes fell to 8.3 months. That’s more than double than the supply of existing homes for sale (see above).
- Sales may have benefited from a decline in mortgage rates that started in mid-January, but rates have started climbing since then.
Why are new home sales up when existing home sales are down? Inventory. Double the level of inventory has led homebuilders to lower prices for new homes over the past year, which has attracted more buyers.
Mortgage Rates Tick Lower
30-year mortgage rates averaged 6.81% this week, down slightly from the prior week. With such volatility in the stock market, you would expect rates to be lower than they are, but since when is anything normal these days?
I guess the best thing we can say about rates is at least they’ve stayed within a narrow range of around 6.6%-6.8% lately. According to Freddie Mac’s chief economist Sam Khater, “this stability continues to bode well for buyers and sellers alike.” Let’s hope he’s right.
