Home Stock Market New home sales skyrocketed against expectations as builders raced to meet demand

New home sales skyrocketed against expectations as builders raced to meet demand

The numbers: New home sales happen at a seasonally adjusted annual rate of 1,021 million as of March, US Census Bureau fifth report. It represents the fastest pace of new home sales since 2006.

Compared to the previous month, sales have increased by 20.7% and compared to March 2020, sales have more than doubled. In addition, the US Census Bureau revised the sales figure for February to 846,000, from the originally reported level of 775,000.

The average forecast of economists polled by MarketWatch is 888,000.

What happened: Sales rates increased everywhere in the country except the West, where they fell 30%. The largest increase in sales occurred in the South, with a 40% increase.

Unlike an existing home sale report, a new home sale report from the Census Bureau records sales when the contract is signed rather than when the sale ends. As a result, the March numbers are likely to be unaffected by bad weather in February. The regions of the South witnessed a long record cold, causing many business activities in the region to stall.

The number of new homes for sale at the end of March was unchanged from the previous month, but was down 7% from a year ago. However, when you take into account sales, the March inventory was only 3.6 months, down from 4.4 months in the previous month.

Big picture: Borrow the famous line from “Field of Dreams”, if you build it, they’ll come. In today’s housing market, home builders continue to see rising demand, in large part because buyers are struggling to find existing homes to buy.

Years of basic construction caught up with America

Years of basic construction have caught up with the United States Now, the country has a serious shortage of homes – up to 4 million units, according to Freddie Mac – to accommodate buyers.

Millennials have reached a time when homebuying has become so lucrative, and the pandemic has caused people to rethink their living circumstances. All of that to say demand in this market is organic, according to economists, and not driven by risky lending.

For their part, the builders are having difficulty keeping up with the demand in the market because they are not involved in speculative construction. Of the new homes sold in March, only about a quarter of them have already been built – most are in the process of construction or not yet started. A year ago, more than 40% of new homes for sale were completed.

However, there are still some difficulties for the market. Although mortgage rates have dropped in April so far, if they start to rise again in the future could limit buyers’ interest in more expensive new homes. In addition, builders are grappling with a shortage of supplies and equipment, increasing the cost of completing the home.

What are they saying: “Supply is the biggest limiting factor in home sales. Chris Low, chief economist at FHN Financial, said in a pre-current research report of 2.1 months, up from an all-time low of 1.9 months in December last year. home sale report release.

“But the increase from the low was not because more homes were sold, but the sales slowdown,” he added.

“While mortgage rates are a key factor for home buying, the biggest problem right now seems to be inventory, and it will continue to be a breeze in the near term,” said Rubeela Farooqi, US chief economist at High Frequency Economics, wrote in a study. Note.

Market reaction: Dow Jones industrial average
+ 0.88%

and the S&P 500 index
+ 1.31%

Both are up slightly after the release, while home builders – including DR Horton
+ 3.50%
Lennar Corp.
+ 1.54%

and PulteGroup
+ 1.57%

– go even higher in morning session.



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