New-home sales top all estimates on surge in the south

Sales of new homes in the US jumped last month on a welcome dip in mortgage rates and ongoing sales incentives to kick off the crucial spring selling season.

Purchases of new single-family homes increased 7.4% in March to an annualized rate of 724,000, mostly driven by a surge in the South, according to government data released Wednesday. That exceeded all estimates in a Bloomberg survey of economists.

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Sales in the South rose to the fastest pace in nearly four years, building on a smaller gain in the prior month after a weather-stricken start to the year. Sales in the Midwest also climbed, while they fell in the West and Northeast. 

The median sale price, meantime, fell 7.5% to $403,600, mostly reflecting greater sales activity at lower price points. That could also reflect the fact that builders are also sitting on a growing pile of unsold inventory.

The supply of new homes for sale at any stage of construction in March edged up to 503,000, still the highest since 2007. The number of completed homes awaiting purchase ticked up as well, remaining at levels last seen in 2009.

Despite the stronger March results, when mortgage rates dipped, the outlook for housing is more tenuous with home financing rates rebounding to 6.9% as President Donald Trump's tariff policies have spurred a retreat from US assets. That's pushing up borrowing costs and depressing sentiment among consumers and homebuilders, who've already been grappling with affordability challenges for years in the aftermath of the pandemic.

Builders have been leaning on generous sales incentives to boost demand, but it's unclear how long that can continue as Trump's tariffs raise the cost of materials. A homebuilder industry group projects that will boost the cost on contractors by nearly $11,000 per home.

As such, some of the nation's biggest builders have signaled they would slow their pace of construction. Earlier this month, the chief executive of homebuilding giant DR Horton Inc. cited a "slower than expected" start to the spring home-selling season, and said the company's net sales orders slipped 15% in its just-finished quarter.

New-home sales are seen as a more timely measurement than purchases of previously owned homes, which are calculated when contracts close. However, the data are volatile. The government report showed 90% confidence that the change in new-home sales ranged from a 13.1% decline to a 27.9% gain.

The National Association of Realtors will release March data on existing-home sales on Thursday.