Sales of New Homes Boost 1.5%

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Sales of new homes accelerated up to 1.5 percent in March to a seasonally adjusted yearly rate of 417,000, another verification of a sustained housing upturn at the launch of the spring buying season.Sales of new homes exceeded February’s pace of 411,000, though they were below January’s 445,000 — the fastest rate since July 2008, the Commerce Department said on Tuesday.The 700,000 pace is considered healthy by most economists but new-home sales are still below the said pace yet the rate has increased 18.5 percent from 352,000 a year agoMajority of the economists spot more boost ahead, as housing is probably to remain a constant driver of economic growth this year.Jennifer Lee, senior economist at BMO Capital Markets said, “With increasing signs of a softer U.S. economy springing up in the spring, we can take comfort in the resilience of the housing recovery.”More Americans are encouraged to buy new houses due to stable job formation and near-record low mortgage rates. The increase in demand is helping to elevate sales and prices in most markets. Lavish prices are more likely to make homeowners feel richer and spur them in spending more.Another reason why sales lift prices is due to a limited supply of both new and previously occupied homes.
The inventory of new homes for sale amplified 2 percent in March, to 153,000, the second successive gain. Still, that’s the equivalent of a 4.4-month supply at the current sales pace and historically lean, according to Jim O’Sullivan, chief United States economist at High Frequency Economics.
The median price of a new home is 3 percent higher than a year ago, it rose to $247,000 in March.The March sales gain came from a 20.6 percent increase in the Northeast and a 19.4 percent rise in the South. Sales fell 20.9 percent in the West, where problems of supply have hampered home buying. Sales were down 12.1 percent in the Midwest.According to the National Association of Realtors, sales of previously occupied homes dipped in March from February. Still, sales were 10.3 percent higher than a year earlier.
The association mentioned low supply as a ground sales fell in March. Nevertheless in a positive sign, the inventory of formerly occupied homes augmented for the second straight month. That proposes more sellers are positive that the revival will carry on and they can sell at a good price. While low inventories have helped drive more construction of new homes.In March, home builders began work on more than one million new houses and apartments at a seasonally adjusted annual rate. This is the first time the number had crossed that threshold in nearly five years. That reflected a surge in volatile apartment building.After reaching the fastest rate in nearly five years, single-family home construction fell in March.Yet, one of several constraints is a low supply of homes for sale, it could limit sales. More than six years ago the housing bubble burst and since then banks have forced tighter credit conditions and mandate larger down payments. As a consequence, it became harder to first-time homebuyers to qualify for the low mortgage rates that made the Federal Reserve’s efforts to ease credit.