Sales of new homes leapt nearly 21% to highest level in 15 years, while existing homes fell by almost 4%.
By Manuel Gutierrez, Consulting Economist to NKBA
New government figures showed March sales of new and existing homes are moving in different directions.
Sales of new homes rose by a robust 20.7% to an annual rate of 1.02 million units, the highest pace of sales activity since mid-2006.
Sales of existing homes, however, fell by 3.7% to a rate of 6.01 million units. March marks the second straight monthly decline in existing home sales, even though monthly sales since last September have been running at a higher pace than any prior month since the middle of 2006.
Sales of new homes rose by nearly 21% in March, the highest level of activity in 15 years.
Figure 1 demonstrates that, despite some ups and downs, new and existing home sales have each been vigorous over the past few months. In both cases, the current pace of sales has been sharply higher than the year prior to the pandemic.
While home builders can easily react to strong demand for new homes — although somewhat constrained by material supply issues or labor shortages — the supply of existing homes on the market is more limited. In fact, inventories continue to hover near historic lows.
In March, there were 1.07 million homes available for sale. This is modestly higher — by 40,000 homes — than the previous month.
In the left panel of Figure 2, the sharp decline in inventory of homes for sale since May of last year is apparent, with fewer homeowners willing to put their homes on the market.
The months’ supply of homes, which combines sales and inventory of existing homes into one number, is an estimate of the number of months it would take to deplete the inventory at the current sales pace. That supply is also currently at historical lows, with only 2.1 months of available inventory.
Also explaining the drop in existing home sales is the sharp increase in the cost of those homes. The median price of an existing home nationally rose to $329,000 in March, 17.2% higher than the same month last year. For new homes, however, the price increase over the same period was a more modest 5.6%.
Among the four regions, there is actually greater variability in price changes for new homes than for existing ones. The left panel of Figure 3 shows that new home cost changes ranged from a decline of 1.3% in the Northeast to a rise of 13% in the South. In contrast, there was much less variation in the price changes for existing homes. Except for the Northeast, where costs rose by a sharp 21.4% in March, the other three regions showed price increases varying from a low of 13.5% in the Midwest, to a high of 16.8% in the West.
Examining home prices by dollar amount, the variation is wide among the four regions for new as well as existing homes. The median national price of a new home in March, at $348,000, is 6% higher than that of existing homes, which came in at $329,000.
According to Figure 4, prices of new homes are highest in the Northeast, with a median of $505,000, which is 65% higher than the $307,000 for the Midwest.
For existing homes, the highest prices are in the West, where they command nearly half a million dollars, while existing homes in the Midwest fetch only half that amount, with a median price of $248,000.
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