Low interest rates and strong consumer demand fueled a solid increase in new home sales in March, despite the ongoing building materials challenges impacting the industry.
Sales of newly built, single-family homes rose 20.7% from an upwardly revised February number, to a 1.02 million seasonally adjusted annual rate, according to newly released data by the U.S. Department of Housing and Urban Development and the U.S. Census Bureau. This is the highest sales pace since September 2006.
"Our members are seeing strong buyer traffic as continued low mortgage rates are helping fuel sales," said NAHB Chairman Chuck Fowke. "However, builders still grappling with major supply chain issues and soaring materials costs, which are causing construction delays and preventing them from adding to the already very low inventory."
"Despite the increase in sales, housing affordability remains a major concern," said NAHB Assistant Vice President of Forecasting Danushka Nanayakkara-Skillington. "With building material pricing, the challenge for builders in 2021 will be to deal with higher input costs while making sure home prices remain within reach for American home buyers."
A new home sale occurs when a sales contract is signed or a deposit is accepted. The home can be in any stage of construction: not yet started, under construction or completed. In addition to adjusting for seasonal effects, the March reading of 1.02 million units is the number of homes that would sell if this pace continued for the next 12 months. Inventory fell to a 3.6-months' supply, with 307,000 new single-family homes for sale, 44.6% lower than March 2020.
Homes sold that have not started construction are up 150% over last year, an indicator of increasing delays and higher costs associated with construction. The median sales price was $330,800, up from the $328,200 median sales price posted a year earlier.
Regionally on a year-to-date basis new home sales declined 3.3% in the West, and rose in the other three regions, up 36.6% in the Northeast, 53.9% in the Midwest and 50.5% in the South.