After an upward revision, March and April newly-built single-family homes sales data indicate that lower mortgage rates and price incentives increased the volume of transactions as the spring home buying season stabilized after weakness in late 2018. Contracts for new, single-family home sales declined to a 673,000 seasonally adjusted annual rate according to estimates from the joint release of HUD and the Census Bureau. However, this decline was off a strong 723,000 sale pace in March, making that month’s sales rate the best since the Great Recession. Furthermore, the April rate was the third strongest of this cycle.

The March data places the industry back on a trend line that has been in place since 2011. For the first four months of the year, new home sales are 6.7% ahead of the sales pace of the initial four months of 2018. However, those gains have distinct regional clustering. Year-to-date sales are up 10.3% in the South, 6.7% in the West (concentrated in the Mountain states), and 1.3% in the Midwest, while recording a 17.6% decline in the Northeast.

Relative to late last year, sales improved in March and April due to lower mortgage interest rates (now averaging below 4.1% on the 30-year fixed rate mortgage, per Freddie Mac data) and increased use of builder price incentives in March. However, in April pricing rebounded from a median $305,800 to $342,200, suggesting less use of such incentives and some shift of the sales mix.

Inventory continued to fall in April, declining to 332,000 homes for sale after peaking at 347,000 in January. A year prior, new single-family home inventory stood at 299,000. The months’ supply measure has come down to a more normalized 5.9. The count of completed, ready-to-occupy new single-family homes in inventory (seasonally adjusted) increased from 61,000 in April 2018 to 77,000 in April 2019. While this count has stabilized in the early months of 2019, inventory of homes under construction has decreased. Such homes have fallen from 211,000 in January to 188,000 in April.

Tags: economics, home building, housing, sales, single-family