Gains in the West carried new home sales 5.8% higher overall from February. Sales in the West alone jumped 16.7%. More new homes sold in the Northeast last month but the total was well within the recent range. Sales here in the Midwest softened a bit after reaching a high the previous month. Sales in the most important region, the South, were essentially flat with 323,000 homes sold.
The median sales price for a new home moved back above the $300,000 level, coming in at $315,100, which was an increase of 1.2% over last year. Price increases varied more, depending on the regional composition of sales this time. The Midwest and South, on average, are less expensive regions for home buyers, compared to the West and Northeast.
Existing home sales also posted increases in March, rising 4.4% to the highest level since February 2007. Sales rose across three of the four regions; the West was the exception where sales fell slightly. The median sales prices for existing single-family houses increased 6.6% from last year. Accelerated price increases continue to cut into affordability, as seen in the steady decline of the Affordability Index. (See Chart.)
FHFA and S&P Case-Shiller home prices indices accelerated on a year-over-year basis up 6.4% and 5.9%, respectively. Prices are accelerating due to ongoing supply constraints, down to 5.2 months, while existing home supply sits near an all-time low at 3.8 months. Lack of supply is pushing buyers into bidding wars for move-in ready houses.
Bottom Line: The 2017 housing season started off strong. Sales volume and prices increased across all metrics. Price acceleration continues to highlight the ongoing issues facing this market: lack of supply. Higher prices should bring out more current owners to list their homes for sale, which will alleviate some of the supply constraints. Also, as existing home prices close in on the price of a new home, more builders will shift to constructing starter homes for entry-level home buyers.