• March new home sales surged 16.6 percent in April to 619,000 units (SAAR), according to the Census Bureau. It was the largest monthly gain since January 1992 and sales reached their highest level since January 2008.
• Inventory of new homes on the market held up despite strong sales, but remains exceptionally tight.
• The median price of new homes sold increased 9 percent over the month to an all-time high.

New home surged 16.6 percent in April to 619,000 units at a seasonally adjusted annual rate (SAAR), strongly beating expectations, according to the U.S. Census Bureau (figure 1). It was the largest month-over-month percent gain since January 1992 and new home sales reached their highest level since January 2008, one month after the Great Recession officially began. However, the annual growth rate of new home sales – 23.8 percent in April – was not far beyond recent experience: New home sales increased in excess of 20 percent year-over-year in July, April and February of 2015. 

Strong single-family home permitting, starts, and construction activity earlier this spring all pointed to strong new home sales on the horizon. As of April 2016, single-family permits were up 8.4 percent from a year earlier, single-family starts were up 4.3 percent, and the number of single-family homes under construction was up 18 percent. However, until April, this construction activity had yet to translate into sales.

Home sales for the past three months were also revised upward by a net 44,000 units: January 2016 new home sales were revised from 521,000 units to 526,000 units, February 2016 new home sales were revised from 519,000 units to 538,000 units, and March 2016 home sales were revised from 511,000 units to 531,000 units.

Growth was strongest in the Northeast where new home sales increased by 53 percent to 55,000 units (SAAR), more than triple their level in April 2015 (13,000 units) and in the West were home sales grew 19 percent to 152,000 units. Sales were also up 16 percent in the South to 352,000 units but fell by 5 percent to 60,000 units in the Midwest.

While the inventory of new homes on the market remains exceptionally tight, inventory held up despite strong sales numbers in April. There were 243,000 new homes on the market in April, essentially unchanged from 244,000 in March. In a testament to the strength of underlying demand, construction had not yet started on more than one-third of new homes sold in April. Just a few years ago, more than half of new homes sold were completed finished. Today, the share is just under 30 percent.

However, strong demand was also clearly evident in price trends. The median seasonally adjusted price of new homes sold in April jumped 9 percent from March and is up 9.8 percent from April 2015 at $321,700. It was the highest median price for new homes sold on record. And while new home sales numbers are just approaching the level where they stood at the start of the recession, the median price of new homes sold is almost 40 percent above where it stood in late 2007 and early 2008.