Tediously bland wooden boxes newly-built atop suburban concrete farms: Get ’em while there’s a glut!
New home sales in America surprised to the upside in a mid-week data release exactly no one cared about.
At 724,000, the annualized pace for March was the briskest since September and blew past every estimate. In the south, the 483,000 pace was the fastest in four years, and the MoM increase, nearly 14%, the second-briskest since last year’s spring buying season.
The pick-up in the nation’s biggest market comes on the heels of bad weather at the beginning of the year.
Note that mortgage rates were still falling in the period covered by the release. In fact, financing costs hit what, at that point, was a YTD low in mid-March. Since then, rates have moved back up near 7%.
The latest MBA update showed the average 30-year fixed rose another 9bps over the last week. As the figure below shows, that’s nearly 30bps in two weeks, and it undercut application activity again. Refis were hit especially hard.
“These higher rates drove a 20% drop in refinance applications, especially for higher balance loans, with the average loan size falling substantially,” MBA VP Joel Kan said Wednesday, adding that purchase apps were down sharply too as “economic uncertainty and rate volatility impacted prospective homebuyers.”
So, whatever happened last month’s ancient history. Maybe don’t get too excited about the jump in new home sales.
Do note: Builders are sitting on an enormous pile of unsold properties. Total supply moved up again in March to 503,000 according to Wednesday’s government release.
At the same time, the completed homes awaiting sale series (shown above) likewise edged up to another “since 2009” high.
That’s going to drive discounting and incentives (e.g., rate buy-downs), which in turn eat into builder margins. Indeed, the median new home price dropped almost 8% last month to “just” $403,600, the lowest since November, and the second lowest since February of 2022.
According to an update from Redfin’s Lily Katz, 44.4% of home-sale transactions in Q1 came with seller concessions. That was the second-highest ever, behind only Q1 of 2023.
The newer home across the street from mine went on the market last week. It took exactly two hours to sell.
We put my recently deceased father’s house on the market this week. Big house (by my middle class standards), just over the line into the Philly suburbs, great neighborhood. Only built in 1992, but needs new windows, carpet, kitchen and bathroom, garage door, front door…… 20 showings, 3 offers and a short bidding war and we’re sold in days, $35k over asking price (which was at least $150k more than I expected to put it on the market for).