New-Home Sales Pace Slows 7.6% in March
Rising mortgage rates caught up with home buyers in March, reducing sales of new homes by 7.6% to the slowest pace in 10 months, the Commerce Department reported Monday.
But analysts noted that March’s pace was still greater than last year’s monthly average and that there was little chance sales could keep up with the pace set in the first two months of the year.
“Things are not falling apart on us,” said economist David F. Seiders of the National Assn. of Home Builders.
Sales totaled 672,000 at a seasonally adjusted annualized rate, the smallest since the 667,000 rate of May, the Commerce Department said. Buying stalled in every region except the Midwest, where activity showed a slight gain.
The West, which is dominated by figures from California, saw sales drop 4.1% to a rate of 208,000.
The report also shows that sales were far stronger in January and February than preliminary figures indicated. The annualized rate was 729,000 for January and 727,000 for February, up more than 20,000 than first believed for each month.
“The pace of sales in January and February was simply unsustainable,” economist David Berson of the Federal National Mortgage Assn. said.
Thirty-year, fixed-rate mortgages averaged 7.62% in March, more than half a percentage point higher than in January. That meant an increase of about $35 in the monthly payment on a $100,000 mortgage. Rates have been hovering at about 8% for the last several weeks.
As a result, Seiders said, he thinks some prospective buyers “around the edges of affordability” would shift from fixed-rate to adjustable-rate mortgages, which average about 2.25 percentage points less.
Seiders, noting that membership surveys for April found builders remained upbeat, said he is concerned about the inventory level. “It’s food for thought,” he said, because a big backlog could curb construction activity.
The seasonally adjusted estimate of new houses for sale at the end of March was 379,000, representing a supply of 6.8 months at the current sales rate. It is the largest inventory since 380,000 homes were on the block in February 1980.
Existing-home sales, by contrast, shot up 6.9% to a 4.21-million annualized rate in March, the highest since a rate of 4.35 million for December 1993.
Analysts noted that whereas the new-home sales report is based on current contracts, the existing-sales report often involves closings based on mortgages secured several months earlier. Mortgages were lower then, and therefore more homes were sold.
The median price of a new home was $138,000, up from $130,000 a year ago but unchanged from February. The median is the midpoint, meaning half the homes cost more and half cost less.
In the Northeast, sales plunged 21.2% to a 52,000 annualized rate, the largest decline since sales fell 29.2% in January; in the South, sales dropped 10% to a 296,000 rate, the steepest drop since a 17.8% decline in August. The Midwest’s gain was 0.9% to a 116,000 rate.
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New-Home Sales
Seasonally adjusted annual rate, in thousands of units:
(March 1996): 672
Source: Commerce Department
