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Sales of New Homes Shrank in March, but That’s Good in a Way

Sales of New Homes Shrank in March, but That’s Good in a Way

photo credit: Grow Community

New-home sales dropped more than 11% in March, the largest month-on-month decline in over a year, according to a Department of Housing and Urban Development report released on Thursday, but sales were still 19% above March 2014.

That’s in stark contrast to Wednesday’s report, from the National Association of Realtors®, showing that sales of existing homes grew 6% in March, hitting their highest rate in 18 months.

The HUD report, however, frequently shows volatile monthly swings. That’s because it uses a small sample size and has a huge margin of error. The numbers are often used as an indicator to predict household appliance and furniture sales in the coming months.

Still, the slowdown in sales—from 543,000 in February to 481,000 sales in March—also meant prices are dropping. The median sales price of a new home last month was $ 277,400, down from $ 281,600 in February. To Jonathan Smoke, chief economist here at realtor.com®, that’s good news.

“It is good to see that the median new-home price was down,” he said. “That’s three months of decline in price and evidence that builders are shifting toward more affordable product to appeal to entry-level and first-time buyers.”

About 35% of the new homes sold in March were in the $ 200,000 to $ 299,999 price range, according to the report. Also, 20% went to buyers in the $ 300,000 to $ 399,999 range. Nearly two-thirds of new-home buyers chose houses that were still under construction, most likely so they could select finishes and watch the process.

Thanks to the slower sales, inventory is up to 5.3 months—”which remains too tight,” said Smoke. A six-month supply of homes is considered healthy.

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