Decline in mortgage rates boosts new home sales in March
Amodest decline in mortgage rates and lean existing inventory helped boost new home sales in March even as builders and consumers contend with uncertain market conditions.
Sales of newly built, single-family homes in March increased 7.4% to a 724,000 seasonally adjusted annual rate from a revised January number, according to newly released data from the U.S. Department of Housing and Urban Development and the U.S. Census Bureau. The pace of new home sales in March was up 6.0% compared to a year earlier.
“The March new home sales data shows that demand continues to be present in the market, provided affordability conditions permit a purchase,” said Buddy Hughes, chairman of the National Association of Home Builders (NAHB) and a home builder and developer from Lexington, N.C. “An increase in economic certainty would be a big boost to future sales conditions.”
“Lower mortgage interest rates helped boost the pace of new home sales in March,” said NAHB Chief Economist Robert Dietz. “In February, the average 30-year fixed rate mortgage was 6.84%, while in March it fell to 6.65%.”
A new home sale occurs when a sales con-
tract is signed, or a deposit is accepted. The home can be in any stage of construction: not yet started, under construction or completed. In addition to adjusting for seasonal effects, the March reading of 724,000 units is the number of homes that would sell if this pace continued for the next 12 months.
New single-family home inventory in March continued to rise to a level of 503,000, up 7.9% compared to a year earlier. This represents an 8.3 months’ supply at the current building pace. This level of supply continues to be reasonable given that the resale, single-family months’ supply remains lean at just 3.4. The count of completed, ready-to-occupy homes available for sale increased to 119,000, up 34% from a year ago.
The median new home sale price in March was $403,600, down 7.5% from a year ago. Sales were particularly strong at lower price levels. Compared to March 2024, new homes sales were 33% higher for homes priced below $300,000 and 28% higher for new homes priced between $300,000 and $400,000.
Regionally, on a year-to-date basis, new home sales are up 12.9% in the South, but are down 32% in the Northeast, 18.3% in the Midwest and 6% in the West. n
Housing starts down on economic uncertainty
Constrained housing affordability conditions due to elevated interest rates, rising construction costs and labor shortages led to a reduction in housing production in March.
Overall housing starts decreased 11.4% in March to a seasonally adjusted annual rate of 1.32 million units, according to a report from the U.S. Department of Housing and Urban Development and the U.S. Census Bureau.
The March reading of 1.32 million starts is the number of housing units builders would begin if development kept this pace for the next 12 months. Within this overall number, single-family starts decreased 14.2% to a 940,000 seasonally adjusted annual rate and are down 9.7% compared to March 2024. The multifamily sector, which includes apartment buildings and condos, decreased 3.5% to an annualized 384,000 pace.
“The drop in March housing starts is a clear signal that affordability pressures are
intensifying,” said Buddy Hughes, NAHB chairman. “Elevated mortgage rates and rising construction costs are making it increasingly difficult to deliver homes at price points accessible to entry-level buyers. We're seeing demand soften as more potential home owners are priced out of the market.”
“March's decline in housing production reflects the ongoing struggle to balance construction costs with the need for affordable
Builder confidence indicates slow start for Spring season
Growing economic uncertainty stemming from tariff concerns and elevated building material costs kept builder sentiment in negative territory in April, despite a modest bump in confidence likely due to a slight retreat in mortgage interest rates in recent weeks.
Builder confidence in the market for newly built single-family homes was 40 in April, edging up one point from March, according to the NAHB/Wells Fargo Housing Market Index (HMI) released recently.
“The recent dip in mortgage rates may have pushed some buyers off the fence in March, helping builders with sales activity,” said NAHB Chairman Buddy Hughes. “At the same time, builders have expressed growing uncertainty over market conditions as tariffs have increased price volatility for building materials at a time when the industry continues to grapple with labor shortages and a lack of buildable lots.”
“Policy uncertainty is having a negative
impact on home builders, making it difficult for them to accurately price homes and make critical business decisions,” said NAHB Chief Economist Robert Dietz. “The April HMI data indicates that the tariff cost effect is already taking hold, with the majority of builders reporting cost increases on building materials due to tariffs.”
When asked about the impact of tariffs on their business, 60% of builders reported their suppliers have already increased or announced increases of material prices due to tariffs. On average, suppliers have increased their prices by 6.3% in response to announced, enacted, or expected tariffs. This means builders estimate a typical cost effect from recent tariff actions at $10,900 per home.
The latest HMI survey also revealed that 29% of builders cut home prices in April, unchanged from March. Meanwhile, the average price reduction was 5% in April, the same rate as the previous month. The use of
housing,” said Danushka Nanayakkara-Skillington, NAHB’s assistant vice president for forecasting and analysis. “High material prices and labor shortages continue to challenge our ability to build homes that meet the budget constraints of many families. Without targeted policy support, addressing the affordability crisis remains an uphill battle.”
On a regional and year-to-date basis, combined single-family and multifamily starts were 8.6% higher in the Northeast, 3.3% higher in the Midwest, 8.5% lower in the South and 10.6% higher in the West.
Overall permits increased 1.6% to a 1.48-million-unit annualized rate in March. Single-family permits decreased 2% to a 978,000-unit rate. Multifamily permits increased 9.3% to a 504,000 pace.
Looking at regional permit data on a yearto-date basis, permits were 24.7% lower in the Northeast, 4.7% higher in the Midwest, 0.4% higher in the South and 8.8% lower in the West.
In March, the number of single-family homes under construction is at 632,000 homes while the count of apartments under construction has fallen to 759,000 units n
sales incentives was 61% in April, up from 59% in March.
Derived from a monthly survey that NAHB has been conducting for more than 35 years, the NAHB/Wells Fargo HMI gauges builder perceptions of current single-family home sales and sales expectations for the next six months as “good,” “fair” or “poor.”
The survey also asks builders to rate traffic of prospective buyers as “high to very high,” “average” or “low to very low.” Scores for each component are then used to calculate a seasonally adjusted index where any number over 50 indicates that more builders view conditions as good than poor.
The HMI index gauging current sales conditions rose two points in April to a level of 45. The gauge charting traffic of prospective buyers increased one point to 25 while the component measuring sales expectations in the next six months fell four points to 43.
Looking at the three-month moving averages for regional HMI scores, the Northeast fell seven points in April to 47, the Midwest moved one point lower to 41, the South dropped three points to 39 and the West posted a two-point decline to 35. n
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