March new home sales rose 4 percent from February and 8.8 percent from a year ago, to 694,000 units (SAAR), according to the U.S. Census Bureau. Data from the prior three months was also revised up by a combined 152,000 units.
Given recent strength in both new home permits and starts, it was only a matter of time before sales of new homes themselves perked back up. And revisions to prior months’ data which initially showed disappointing drops now reveals that the start to 2018 may not have been so bad after all. Combined with yesterday’s decent existing home sales data, today’s report gives the housing market a much-welcome double whammy of good news, especially on the inventory front. Inventory of existing homes has risen in each of the past three months, the first such streak since early 2015, and new home inventory has now been above the 300,000 threshold for two straight months – the first time in almost a decade. In a market starving for inventory of all kinds, builders are finally putting the old adage of ‘if you build it, they will come’ to the test. But despite these green shoots, builders still face a number of headwinds pushing against the delivery of more-affordable new homes in particular. Rising materials and labor costs are weighing heavily, forcing builders to deliver homes at a price point that may be beyond the reach of many first-time and middle-income buyers. Builders are proving they can build a certain kind of home, but whether enough buyers can afford to come forward for them in meaningful numbers is an open question.
