WASHINGTON — Sales of new U.S. homes increased 4.5% in March, the third straight monthly gain as the housing market appears to be cautiously recovering from a mortgage rate spike last year that caused homebuying to slump.
The Commerce Department said Tuesday that new homes sold at a seasonally adjusted annual rate of 692,000 in March, up from 662,000 in February. For the first three months of 2019, new-home sales were 1.7% higher than the same period a year ago.
March’s sales pace was the strongest since November 2017, a sign that the market for newer properties is building some momentum. New-home sales began to rebound after the average 30-year mortgage rate fell from its recent peak of nearly 5% in November 2018.
“Homebuilders continue to indicate encouraging orders and traffic trends, crediting the drop in mortgage rates with re-energizing housing demand,” said Stephen Stanley, chief economist at Amherst Pierpont Securities. “The next 2-3 months will be critical, as the spring selling season will be a telling test of whether housing demand is truly firming.”
Yet the housing market has been uneven in recent months, a sign that years of price gains have hurt affordability and that lower mortgage rates can only remove a degree of the pressure from higher costs. Sales of existing homes — which make up the bulk of purchases — plunged 4.9% in March, the National Association of Realtors said Monday.
The median sales price of a new home in February tumbled 9.7% to $302,700.
Price pressures are creating a search for more affordable options.
In March, 16% of new-homes were sold for less than $200,000. This was marked increase from 2018, when just 12% of new homes sold for less than $200,000. Still, monthly sales figures can be volatile and the industry’s preference for more profitable homes at higher prices could cause that share to dip in the coming months.