New home sales rose 20.7 percent in March as the torrid housing market reignited, according to data released Friday by the Commerce Department.
Sales of new single-family homes rose sharply last month after declining more than 16 percent in February due to harsh winter weather. The U.S. would have seen more than 1 million new homes sold on a seasonally adjusted basis if March’s rate of sales lasted an entire year — the fastest rate since 2006.
Home sales in the South soared 40 percent at a seasonally adjusted annualized rate in March, 30.7 percent in the Midwest and 20 percent in the Northeast, but fell 30 percent in the West.
“February saw much worse than normal winter weather and this kept homebuyers indoors, while more seasonable March weather coaxed them back outside,” said David Berson, chief economist at Nationwide, in a Friday analysis.
Home sales and housing prices have skyrocketed since last spring as ultralow interest rates, a flood of federal stimulus and the widespread adoption of telework pushed more buyers into the market. The rush of demand, severe lumber shortages and months of construction limitations has also exacerbated a severe housing shortage, driving the fastest increase in housing prices since the early 2000s.
There were roughly 307,000 new houses for sale at the end of March, enough to cover three months of demand at last month’s rate of sales. The median sale price for a new home was $330,800, and the average sale price was $397,000.
While homeowners have been able to ride rising housing prices to greater wealth, the sharp increase in costs and lingering supply issues pose challenges for aspiring homeowners at the lower end of the income spectrum.
“Some buyers are finding themselves priced out, especially first-time buyers trying to compete in hot housing markets. More renters will be unable to become homeowners if supply, especially at the lower end of the market, does not come on line this year,” wrote Yelena Maleyev, economist at Grant Thornton.
“Investors who are buying to rent instead of sell new properties are crowding many middle-income buyers out of the market.”
President Biden’s $2.3 trillion infrastructure plan seeks to drastically expand the supply of affordable homes through a combination of direct investments in building and repairing public housing as well as tax credits and grants for states and localities that scrap zoning laws that limit the ability to build cheaper homes.
Republican lawmakers, however, have rejected including housing provisions in an infrastructure package and are averse to building out public housing instead of steering Americans toward privately held homes.