March 2022 new home sales
What happened this month:
Sales of new homes slipped again, down 8.6% to an annual rate of 763,000 in March, following a decline in sales of existing homes, as the combination of high inflation and the Fed’s efforts to control it pushed mortgage rates higher and ruled housing demand. Even if the The Fed only adjusted the short-term rate target by 25 basis points in March, shifting expectations for further hikes in the near future pushed mortgage rates up almost 1 percentage point (91 basis points) during the month as investors realized that the invasion of Ukraine by the Russia would not derail the Fed’s plans to raise short-term rates. It’s worth noting that February’s home sales tally has been revised up and now shows growth from a year ago, but March’s numbers were down 12.6% from it. a year ago.
What does that mean:
As we saw in the March construction data, builder confidence has declined as buyer demand is hurt by rising costs and builders continue to struggle to complete homes under construction, even as housing starts increase. Reflecting that demand for new homes still outstrips supply, completed new homes continue to sell quickly as buyers anxious to lock in a mortgage rate look to homes that offer the promise of closing quickly. Completed homes were on the market for only 3.0 months, a record low for March. Notably, a large pipeline of homes under construction should provide more options for homebuyers later this year. Many new homes may not yet be in the highly desirable neighborhood, ready to move in conditionbut they are coming.
For the future, with mortgage rates and the rents both are climbing, movers this year are seeing their costs go up whether they choose to lease or buy. The median selling price of new homes continues to climb, up 21.4% to $436,700. Builders are trying to increase entry-level supply to a price point below $300,000, but they’re still lagging behind last year’s pace, meaning new homes are likely a viable choice for fewer first-time homebuyers. Only 1 in 7 new homes sold in this price range in March compared to more than 3 in 10 sold in this range a year ago. Keeping a home search on track and under budget will require careful attention from both buyers and renters. Make a list of “must-haves” and determine which “must-haves” can be adjusted to find more options to consider.