Sales of new homes increased more than expected from February to March, a sign that buyers might be reentering the market amid somewhat lower mortgage rates.
New home sales in March rose 9.6% last month to a seasonally adjusted annual rate of 683,000, according to a report Tuesday from the Census Bureau. The reading follows March's decline in mortgage rates, which could be spurring more home purchases. Nevertheless, sales were 3.4% lower than in March 2022.
EXISTING HOME SALES FALL AND PRICES DROP AMID WORSENING HOUSING ROUT
As of Tuesday, the average rate on a 30-year fixed-rate mortgage was 6.39%, down from a recent peak of over 7% in October and into November, according to Freddie Mac. But that number is up from a recent low of just about 6.1% registered in late January and early February. The rate on an average 15-year, fixed-rate mortgage was 5.76%.
The median sales price for a new home was $449,800 in March, an increase from the month before.
However, sales are down by a large margin from the peaks notched in 2020, when the Federal Reserve cut interest rates close to zero. The housing market is in what most economists characterize as a recession, and there continues to be fear that the downturn is a harbinger for a broader economywide recession.
The Fed once again hiked interest rates last month by a modest quarter of a percentage point, even despite the uncertainty from the collapses of Silicon Valley Bank and Signature Bank. That means more pressure on mortgage rates this year.
There have been recent signs that the labor market is finally beginning to soften in response to the monetary tightening, although most investors think the central bank is going to ram through another upward rate revision at its next meeting.
Investors now assign about an 84% chance that the Fed will raise rates yet again, according to CME Group’s FedWatch tool, which calculates the probability using futures contract prices for rates in the short-term market targeted by the Fed.
In other housing news, sales of existing homes declined in March and are down a whopping 22% from the year before. Existing-home sales fell by 2.4% in March to a seasonally adjusted annual rate of 4.44 million, according to a recent report by the National Association of Realtors.
The median price of an existing home in March was $375,700, a decline of 0.9% from the year before.
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Additionally, the number of housing starts tumbled in March, according to a report released last week by the Census Bureau.
Housing starts measure the change in the number of new residential buildings that began construction. Starts fell 17.2% from March 2022 to this past month. They are now at 1.42 million. From February to March, they fell 0.8%.