March New Home Sales: Back on the Gas

• March new home sales totaled 1.021 million (SAAR), up 20.7% from February and 66.8% from March 2020 to the highest level since August 2006, according to the U.S. Census Bureau.
• The median sales price of new houses sold in March 2021 was $330,800, down 4.4% from February and up just 0.8% from a year ago.
• The seasonally adjusted level of new homes available for sale in March was 307,000, flat from February and down 7% from March 2020.

New home sales soared in March to the highest level since August 2006, and data from prior months were revised upward, cementing the ongoing and enduring strength of the home building industry as the economy continues to improve and buyer demand stays hot. The factors that have fueled the recent strength in the market for new homes are holding fast – mortgage rates remain historically low, the supply of existing homes available for sale continues to fall short of demand and a wave of young adults are eagerly seeking ways to enter the market. Builders have clearly taken note, upping their activity in recent months and expressing more confidence that the wave of home shoppers will continue to swell going forward. The uptick in sales and building activity does come as the cost of key building materials rises at the fastest pace in decades, and sooner or later it's likely these rapid increases in materials costs will be passed along to buyers in some form. But in today’s hotly contested market, rising prices have become the norm and so far have done little to dampen buyer enthusiasm. And encouragingly, price increases were relatively muted in March, and more than a third (35%) of sales were in the $200,000-$299,000 price range -- a sweet spot for younger buyers and/or those on more modest budgets. There may come a point where these rising costs impact demand for new homes, but for now, home builders seem to have found their groove.