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Hello John,
Would you willfully exchange your 3% mortgage rates and affordable payments for today’s market rates? In many cases, the answer is no. “We are in a housing market today where people don’t have to move,” says Ali Wolf, Chief Economist for Zonda. “Existing homeowners are perfectly content staying put with their low interest rates, and many renters have decided to stay put in place until there is more certainty. This means the market relies heavily on ‘life happens’ buyers—those driven by life events like marriage, divorce, children, or retirement.” For the latter, new construction homes may be the best answer to the severe lack of existing home inventory.
Therefore, it is not surprising that new home sales surged 8.8% to a seasonally adjusted annual rate of 693,000 units in March compared to the previous month, the highest level since September, according to the U.S. Census Bureau. New home sales increased 8.3% on a year-over-year basis and represent about 14% of total home sales.
Dealing With Headwinds
However, things are not all rosy for new home buyers. The median new home price jumped to a seven-month high from February, rising to $430,700 from $400,500. In comparison, the median price of an existing home reached $393,500 last month. With mortgage rates flirting with 7% and likely to remain higher for longer than expected as the Federal Reserve Bank is dragging its feet to cut interest rates, affordability is a concern.
“Builders completed construction on almost 350,000 new homes in the first three months of 2024, and they were eager to sell them. And some builders are offering incentives, such as rate buydowns, to entice buyers. All of these factors—the shortage of existing homes, completions of new homes, and incentives—are beginning to fade,” says Holden Lewis, Senior Writer at NerdWallet. With slower-than-expected housing starts and new home mortgage applications last month, home builders may be more hesitant to offer their properties for a discount.
"New home sales have remained remarkably strong recently," said Oliver Allen, Senior U.S. Economist at Pantheon Macroeconomics. "That said, the renewed rise in mortgage rates and dip in mortgage applications over the past couple of months means that new home sales will probably tread water at best in the near-term, while existing home sales will fall."
We’ll keep you updated on further developments. In the meantime, if you’d like more information about buying/selling or refinancing in today’s market, give us a call or drop us an email.
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