The sale of new homes is boosting housing and the economy at a very opportune time—the beginning of a New Year when it’s still uncertain when the Fed will begin to cut their interest rates.
It’s a heartening sign that consumers are not waiting longer for mortgage rates to fall. So far, 30-year conventional fixed rates are staying close to their high of 7 percent, so that some one-third of sales are all cash transactions.
Sales of new single‐family houses in February 2024 were at a seasonally adjusted annual rate of 662,000, according to estimates released jointly today by the U.S. Census Bureau and the Department of Housing and Urban Development. This is 0.3 percent (±16.2 percent)* below the revised January rate of 664,000, but is 5.9 percent (±14.3 percent)* above the February 2023 estimate of 625,000.
The median sales price of a new home sold in February fell to $400,500 from $414,900 in the prior month. The seasonally‐adjusted estimate of new-home supply was 8.4 months at the current sales rate. The growing supply of new homes is bringing down prices.
Overall, home buying demand for newly built homes remains strong because resale home inventory is still low, though existing home sales are also rising.
Sales are likely to pick up further as mortgage rates are expected to decline through the rest of the year. Fannie Mae expects the 30-year mortgage to end the year at 6.4%, versus the 6.87% as of March 21, per Freddie Mac data.
This must be why builder confidence rose for the fourth month in row in March, in line with growing buyer demand.
The expectations of a jump in demand in the coming months pushed the National Association of Home Builders’ (NAHB) monthly confidence index up 3 points to 51 in March, the trade group said on Monday.
That’s also why housing starts jumped in February as well, I said last week. Construction of new U.S. homes rebounded 10.7% in February to an annual pace of 1.52 million units, reported the Commerce Department last Tuesday. Single Family Starts are up 35% Year-over-year in February; though Multi-Family Starts were down sharply, said the NAHB. That is the biggest gain in nine months.
“The solid level of single-family production in February tracks closely with rising builder sentiment, and with mortgage rates expected to moderate further this year, this will provide an added boost for single-family building,” said Carl Harris, chairman of the National Association of Home Builders (NAHB). “But policymakers need to help the industry's supply-chains in order to protect housing affordability and add much needed supply to boost inventory.”
Might a proposed settlement by the National Association of Realtors (NAR) to bring down the standard commission paid by Sellers speed up home sales this year by reducing sale costs?
The settlement proposed by the National Association of Realtors, which will go into effect in mid-July if it’s approved, would require that listings on the NAR-run Multiple Listing Service — a database of homes for sale — no longer have a field showing how much buyer’s agents will earn in commissions on the sale.
Although fees for real-estate agents are technically negotiable, they typically run from 4% to 6% of a home’s sale price, depending on local market customs. Home sellers traditionally pay these commissions, which are then typically split between the buyer’s and seller’s agents.
This might make a difference in prices for entry-level homes, where the profit margins are lower, and buyers more price-conscious. Anything that reduces costs is welcome in a reviving housing market.
New-home construction and sales are an important segment of our economy because they employ many in sectors other than construction, such as finance, insurance, and advertising. So when positive and growing it boosts overall economic growth.
Harlan Green © 2024
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