The number of homes available for sale rose by more than 10 percent in March compared to the same time a year ago, data from the U.S. Census Bureau showed on Tuesday.
Last month, there were 477,000 new homes available for sale, 44,000 more than in March of 2023. Compared to February 2024, new homes ready for sale were up by close to 3 percent. The March data amounted to 8.3 months of supply of homes available for sale.
Read more: What Is a Mortgage? Types & How They Work
Meanwhile, sales for the month were up nearly 9 percent and on a yearly basis also rose more than 8 percent.
Context:
The issue of supply of homes has been key to the question of affordability. Lack of enough homes available to meet demand from buyers has contributed to a jump in prices at a time when borrowing costs are also elevated.
The median sale price of a home came in at $430,700 in March up from $406,500, even though on a yearly basis, prices were down close to 2 percent. Analysts suggested this may be because builders are constructing smaller homes.
"The decline in new home sale prices likely reflects smaller floorplans with fewer amenities than a year earlier," Bill Adams, chief economist at Comerica Bank, said in a note shared with Newsweek.
What we know:
Mortgage rates have hovered around 7 percent in recent weeks, making it challenging for home buyers to afford a home. But a lack of available homes for sale is escalating competition for those buyers who are able to purchase property.
"The spring home-buying season has kicked off but is being hampered by low supply and the highest mortgage rates since November," Yelena Maleyevm KPMG's senior economist, shared in a note shared with Newsweek. "Builders are benefiting from tight supply in the resale market; however, they cannot ramp up fast enough to meet demand."
Maleyev pointed out that new homes are able to sell at higher prices as they are also able to give incentives to buyers, such as mortgage rate buydowns.
"Incentives work," she said, pointing to the fact that sales were 8.3 percent higher in March compared to the same time last year.
Views:
Builders able to provide incentives for buyers will help keep some supply of homes in the market, economists say, at a time when homeowners looking to sell are locked into their current low mortgages.
"Homebuilders will continue to satisfy demand as inventory of existing homes remains low," Jeffrey Roach, chief economist for LPL Financial, said in a note shared with Newsweek. "Demand for new homes remains strong as homebuilders with in-house mortgage companies attract buyers with below-market rates."
What's next:
A lot of buyers are waiting for when mortgage rates will come down before they can take the plunge into homeownership. When that happens will shape how the housing market evolves this year.
Read more: Compare Top Mortgage Lenders
"Expectations for rate cuts by the Federal Reserve have diminished significantly so far this year, which will keep a floor under mortgage rates for some time," Maleyev said. "Higher rates exacerbate affordability challenges, as many potential buyers remain on the sidelines."
Maleyev said that she expected the Federal Reserve policymakers to slash borrowing costs this year but there was still uncertainty about the trajectory of when that move will come.
"We maintain our forecast of two rate cuts, starting in September but risks to rates remain to the upside. The threshold for a hike in rates is higher than the threshold for a cut but the Fed is looking to keep its options on its next move open," she said.
Uncommon Knowledge
Newsweek is committed to challenging conventional wisdom and finding connections in the search for common ground.
Newsweek is committed to challenging conventional wisdom and finding connections in the search for common ground.
About the writer
Omar Mohammed is a Newsweek reporter based in the Greater Boston area. His focus is reporting on the Economy and ... Read more
To read how Newsweek uses AI as a newsroom tool, Click here.
