Sales of newly built single-family homes in the United States soared in March despite mortgage rates remaining elevated that month.
New home sales, which make up about 10% of the market, jumped 8.8% last month to a seasonally adjusted annual rate of 693,000, according to government figures released Tuesday. That trounced the 670,000 rate projected by economists, according to a FactSet poll, and was the strongest monthly increase since December 2022.
Sales of new homes increased across the country last month, rising the most in the Northeast region by a robust 27.8% from February.
Meanwhile, sales of existing homes, which make up the vast majority of the housing market, fell 4.3% in March to a seasonally adjusted annual rate of 4.19 million, the sharpest drop in more than a year, the National Association of Realtors reported last week.
Housing market poised to remain difficult
The broader US housing market is expected to remain tough for Americans, with mortgage rates poised to stay well above 6% this year, economists say. The Federal Reserve doesn’t directly set mortgage rates, but its actions do influence them, and the central bank isn’t expected to cut interest rates anytime soon. A persistent undersupply of housing also remains a key pressure point in the market, contributing to low affordability.
Housing inventory has improved in recent months, but supply still isn’t keeping up with demand. This means homebuyers have limited options as some homeowners who locked in a low mortgage rate before the Fed began to hike rates in 2022 largely prefer to not sell their homes.
“Despite high prices and mortgage rates, homebuyers have limited options on the resale market, although resale inventories have improved some over the course of this year,” Gregg Logan, managing director at RCLCO Real Estate Consulting, said in a note Tuesday.
“The willingness of the major homebuilders to utilize incentives such as price reductions, mortgage rate buy-downs and paying buyers closings costs continue to support a healthy pace of new home sales,” he added.
A stalled housing market recovery?
The housing market began the year with some momentum as home sales surged, homebuilder sentiment perked up and inventory levels climbed, but now it seems to have fizzled out.
In addition to the March drop in existing home sales, residential construction of single-family homes also fell that month, declining 12.4% to a seasonally adjusted annual rate of 1.022 million units, according to Commerce Department data released earlier this month. Residential construction fell throughout the country except in the West. Meanwhile, building permits for future construction tumbled 3.7% in March to a five-month low.
Data from the National Association of Home Builders showed that 22% of builders cut homes prices in April, down from 24% in March. Meanwhile, the share of builders who offered a sales incentive edged lower to 57% in April from 60% in March. Sentiment among homebuilders in America held steady in April, NAHB said.
“April’s flat reading suggests potential for demand growth is there, but buyers are hesitating until they can better gauge where interest rates are headed,” NAHB’s chief economist, Robert Dietz, said in a release.
This story has been updated with additional context.
Residential Construction Fall and Builder Confidence Flattens in Uncertain Rate Environment
While builder confidence in the market for new residential construction improved in March, it remained flat in April and residential construction numbers showed a decline in momentum as well.
Residential construction starts, which had surged in February, gave back all of those gains in March. The U.S. Census Bureau and the Department of Housing and Urban Development (HUD) report that construction began at a seasonally adjusted annual rate of 1.321 million housing units during the month, a decline of 14.7 percent from February’s level of 1.549 million units. Starts were 4.3 percent lower than their level in March 2023.
Single-family starts fell 12.4 percent to an annual rate of 1.022 million and multifamily starts dived 20.8 percent to 290,000 units. The two categories were down 21.2 percent and 43.7 percent respectively year-over-year.
Permits also declined. The annual rate was 4.3 percent lower at 1.458 million units compared to 1.523 million in February. Permits increased 1.5 percent on an annual basis. Single-family authorizations dropped from 1.032 million to 973,000, a 5.7 percent decline. This was still a 17.4 percent improvement from March of last year. Multifamily permits were unchanged at 433,000 units, down 22.1 percent year-over-year.
Analysts polled by Econoday had forecast starts at 1,480 million and permits at 1.510 million, substantially overshooting both numbers.
The National Association of Home Builders (NAHB) said the NAHB/Wells Fargo Housing Market Index (HMI) broke a four-month string of gains this month, remaining at the 51 level, unchanged from March, but still above the key breakeven point of 50.
Robert Deitz, NAHB’s chief economist, said the flat reading suggests the potential for demand growth is there, but buyers appear to be waiting until there is more clarity on the direction of rates. “With the markets now adjusting to rates being somewhat higher due to recent inflation readings, we still anticipate the Federal Reserve will announce future rate cuts later this year, and that mortgage rates will moderate in the second half of 2024,” he said.
The HMI gauges builder perceptions of current single-family home sales and sales expectations for the next six months as “good,” “fair” or “poor” and asks builders to rate traffic of prospective buyers as “high to very high,” “average” or “low to very low.” Scores for each component are then used to calculate a seasonally adjusted index where any number over 50 indicates that more builders view conditions as good than poor.
The HMI index charting current sales conditions in April and the index gauging buyer traffic each increased 1 point to 57 and 35, respectively. The component measuring sales expectations in the next six months fell 2 points to 60.
Looking at the three-month moving averages for regional HMI scores, the Northeast increased 4 points to 63, the Midwest gained 5 points to 46, the South rose 1 point to 51 and the West registered a 4-point gain to 47.
The April survey also showed that 22 percent of builders cut home prices this month, down from 24 percent in March and 36 percent in December 2023, while the average price reduction held steady at 6 percent for the 10th straight month. Fifty-seven percent of builders used some form of sales incentives. The share was 60 percent in March.
On an unadjusted basis, the Census/HUD report shows housing starts in March are estimated at 110,900 including 87,100 single-family units. The totals in February were 110,100 and 81,700. There were 123,500 permits issued during the month compared to 119,100 in February. The single-family totals rose from 79,400 to 84,300.
Homes were completed during the month at an annual rate of 1.469 million units. This was a decline of 13.5 percent from February and 13.9 percent from the previous March. Single-family completions dropped 10.5 percent and were 8.5 percent lower than a year earlier while multifamily completions were down 19.9 percent.
For the year to date (YTD) housing starts total 318,800, up 1.3 percent from the same period in 2023. Single-family starts have risen 27.1 percent to 239,100 while multifamily starts have fallen by 38.0 percent to 76,400 units.
YTD permits are up 3.8 percent, entirely due to a 24.9 percent increase in single-family permits which helped offset a drop of 25.2 percent in the multifamily sector.
Completions total 347,300 thus far in 2024, an increase of 4.3 percent from 2023. There have been 5.8 percent fewer single-family homes completed but multifamily completions have risen 27.4 percent.
At the end of the reporting period, there were 1.646 million homes under construction, 689,000 of which were single-family homes. in addition, there were 273,000 permits available 141,000 for single-family houses.
Starts dropped by double digits in three of the four major regions and permits also drifted lower.
Starts In the Northeast were down 36.0 percent compared to February and 56.8 percent on an annual basis. Permits dropped 20.8 percent but increased 8.1 percent for the year.
In the Midwest, starts were down 23.0 percent for the month but were 18.0 percent above the March 2023 pace. Permits dropped 14.7 percent from February and 3.4 percent on an annual basis.
The South’s starts fell by 17.8 percent and 11.0 percent from February and from March 2023, respectively. Permits fell 0.6 percent but increased by 0.4 for the year.
The only positive changes were in the West, up 7.1 and 48.1 percent for the month and year. Permitting increased 5.1 percent and 4.1 percent from the two earlier periods.
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As we head into peak home-buying season, signs of life have begun to spring up in the housing market.
Even so, still-high mortgage rates and home prices amid historically low housing stock continue to put homeownership out of reach for many.
Moreover, the National Association of Realtors agreed to a monumental $418 million settlement on March 15 following a verdict favoring home sellers in a class action lawsuit. Still subject to court approval, the settlement requires changes to broker commissions that will upend the buying and selling model that has been in place for years.
Housing Market Forecast for 2024
Elevated mortgage rates, out-of-reach home prices and record-low housing stock are the perennial weeds that experts say hopeful home buyers can expect to contend with this spring—and beyond.
“The housing market is likely to continue to face the dual affordability constraints of high home prices and elevated interest rates in 2024,” said Doug Duncan, senior vice president and chief economist at Fannie Mae, in an emailed statement. “Hotter-than-expected inflation data and strong payroll numbers are likely to apply more upward pressure to mortgage rates this year than we’d previously forecast.”
Despite ongoing affordability hurdles, Fannie Mae forecasts an increase in home sales transactions compared to last year. Experts also anticipate a slower rise in home prices this year compared to recent years, but price fluctuations will continue to vary regionally and depend strongly on local market supply.
U.S. home prices declined in January for the third consecutive month due to high borrowing costs, according to the latest S&P CoreLogic Case-Shiller Home Price Index. But prices year-over-year jumped 6%—the fastest annual rate since 2022.
Chief economist at First American Financial Corporation Mark Fleming predicts a “flat stretch” ahead.
“If the 2020-2021 housing market was too hot, then the 2023 market was probably too cold, but 2024 won’t yet be just right,” Fleming said in his 2024 forecast.
Will the Housing Market Finally Recover in 2024?
For a housing recovery to occur, several conditions must unfold.
“For the best possible outcome, we’d first need to see inventories of homes for sale turn considerably higher,” says Keith Gumbinger, vice president at online mortgage company HSH.com. “This additional inventory, in turn, would ease the upward pressure on home prices, leveling them off or perhaps helping them to settle back somewhat from peak or near-peak levels.”
And, of course, mortgage rates would need to cool off—which experts say is imminent despite rates edging back up toward 7%. For the week ending April 11, the 30-year fixed mortgage rate stood at 6.88%, according to Freddie Mac.
However, when mortgage rates finally go on the descent, Gumbinger says don’t hope they cool too quickly. Rapidly falling rates could create a surge of demand that wipes away any inventory gains, causing home prices to rebound.
“Better that rate reductions happen at a metered pace, incrementally improving buyer opportunities over a stretch of time, rather than all at once,” Gumbinger says.
He adds that mortgage rates returning to a more “normal” upper 4% to lower 5% range would also help the housing market, over time, return to 2014-2019 levels. Yet, Gumbinger predicts it could be a while before we return to those rates.
Nonetheless, Kuba Jewgieniew, CEO of Realty ONE Group, a real estate brokerage company, is optimistic about a recovery this year.
“[W]e’re definitely looking forward to a better housing market in 2024 as interest rates start to settle around 6% or even lower,” says Jewgieniew.
NAR Settlement Rocks the Residential Real Estate Industry
Following years of litigation, the National Association of Realtors (NAR) has agreed to pay $418 million to settle a series of antitrust lawsuits filed in 2019 on behalf of home sellers.
The plaintiffs claimed that the leading national trade association for real estate brokers and agents “conspired to require home sellers to pay the broker representing the buyer of their homes in violation of federal antitrust law.”
Though the landmark settlement is subject to court approval, most consider it a done deal.
The settlement requires NAR to enact new rules, including prohibiting offers of broker compensation on multiple listing services (MLS), the private databases that allow local real estate brokers to publish and share information about residential property listings. The rule is set to take effect in mid-July, once the settlement receives judge approval.
Moreover, sellers will no longer be required to pay buyer broker commissions and real estate agents participating in the MLS must establish written representation agreements with their buyer clients.
NAR denies any wrongdoing and maintains that its current policies benefit buyers and sellers. The organization believes it’s not liable for seller claims related to broker commissions, stating that it has never set commissions and that commissions have always been negotiable.
How Will the New Rules Impact the Buying and Selling Process?
Per the settlement’s terms, the costs associated with buying and selling a home are set to change dramatically.
“The primary things that will change are the decoupling of the seller commission and the buyer commission in the MLS,” says Rita Gibbs, a Realtor at Realty One Group Integrity in Tucson. “It’s gonna cause some chaos.”
While sellers will no longer be able to offer broker compensation in the MLS, there’s no rule prohibiting off-MLS negotiations. Because of this, Gibbs suspects buyers and sellers will continue offering broker compensation off the MLS.
The Department of Justice confirmed it will permit listing brokers to display compensation details on their websites. However, buyer agents will need to undergo the tedious task of visiting countless broker websites to find who’s offering what.
Michael Gorkowski, a Virginia-based real estate agent with Compass, is also trying to figure out how to manage the potential ruling.
“We often work with buyers for many months and sometimes years before they find exactly what they’re looking for,” Gorkowski says. “So in a case where a seller isn’t offering a co-broker commission, we will have to negotiate that the buyer pays an agreed-upon commission prior to starting their search.”
The Changes Will Impact These Home Buyers Most
“In the short term, it is absolutely going to injure buyers, especially FHA and VA buyers,” Gibbs says. “With rare exception, these buyers are not in a position to pay for their own agent.”
Gibbs says that if sellers don’t offer compensation, many buyers who can’t otherwise afford to pay a broker will choose to go unrepresented.
Gorkowski notes that veterans taking out VA loans face a unique challenge under the new rules. “[P]er the VA requirements, buyers cannot pay so it must be negotiated with the seller for now.”
As a result, NAR is calling on the U.S. Department of Veterans Affairs to revise its policies prohibiting VA buyers from paying broker commissions. Even so, there’s skepticism that the federal government will be able to implement changes in time for the July deadline.
Gibbs and Gorkowski are among the many agents especially concerned about first-time home buyers. After July, first-time and VA buyers will be required to sign a buyer-broker agreement stating that they will compensate their broker—but Gibbs says many won’t have the means to do so.
In this situation, agents would likely only show buyers homes where sellers are offering compensation.
“This is a very troubling situation,” Gorkowski says.
Housing Inventory Forecast for 2024
With many homeowners “locked in” at ultra-low interest rates or unwilling to sell due to high home prices, demand continues to outpace housing supply—and likely will for a while—even as some homeowners may finally be forced to sell due to major life events such as divorce, job changes or a growing family.
“I don’t expect to see a meaningful increase in the supply of existing homes for sale until mortgage rates are back down in the low 5% range, so probably not in 2024,” says Rick Sharga, founder and CEO of CJ Patrick Company, a market intelligence and business advisory firm.
Housing stock remains near historic lows—especially entry-level supply—which has propped up demand and sustained ultra-high home prices. Here’s what the latest home values look like around the country.
Yet, some hopeful housing stock signs have begun to sprout:
Existing inventory is showing signs of loosening as impatient buyers and sellers have begun to accept the reality of mortgage rates oscillating between 6% and 7%.
Home-builder outlook also continues to get sunnier, trending back up amid declining mortgage rates and better building conditions.
The most recent National Association of Home Builders (NAHB)/Wells Fargo Housing Market Index (HMI), which tracks builder sentiment, saw a fourth consecutive monthly rise, surpassing a crucial threshold with an increase from 48 to 51 in March. A reading of 50 or above means more builders see good conditions ahead for new construction.
At the same time, new single-family building permits ticked up 1% in February—the 13th consecutive monthly increase—according to the latest data from the U.S. Census Bureau and U.S. Department of Housing and Urban Development (HUD).
Residential Real Estate Stats: Existing, New and Pending Home Sales
Though some housing market data indicates signs of growth are in store this spring home-buying season, persistently high mortgage rates may hinder activity from fully flourishing.
Here’s what the latest home sales data has to say.
Existing-Home Sales
Existing-home sales came to life in February, shooting up 9.5% from the month before, according to the latest data from the NAR. Sales dipped 3.3% from a year ago.
Experts attribute the monthly jump to a bump in inventory.
“Additional housing supply is helping to satisfy market demand,” said Lawrence Yun, chief economist at NAR, in the report.
Existing inventory rose 5.9%—logging 1.07 million unsold homes at the end of February. However, there are still only 2.9 months of inventory at the current sales pace. Most experts consider a balanced market falling between four and six months.
Meanwhile, existing home prices continue to soar to unprecedented heights, reaching $384,500, which marks the eighth consecutive month of yearly price increases and a February median home price record.
New Home Sales
Sales of newly constructed single-family houses ticked down by a nominal 0.3% compared to January, but outpaced February 2023 sales by 5.9%, according to the latest U.S. Census Bureau and HUD data.
Amid a high percentage of homeowners still locked in to low mortgage rates, home builders have been picking up the slack.
“New construction continues to be an outsized share of the housing inventory,” said Dr. Lisa Sturtevant, chief economist at Bright MLS, in an emailed statement.
Sturtevant notes that declining new home prices are coming amid a recent trend of builders introducing smaller and more affordable homes to the market.
The median price for a new home in February was $400,500, down 7.6% from a year ago.
Source: U.S. Census Bureau and U.S. Department of Housing and Urban Development
Pending Home Sales
NAR’s Pending Homes Sales Index rose 1.6% in February from the month prior even as mortgage rates approached 7% by the end of the month. Pending transactions declined 7% year-over-year.
A pending home sale marks the point in the home sales transaction when the buyer and seller agree on price and terms. Pending home sales are considered a leading indicator of future closed sales.
The Midwest and South saw monthly transaction gains while the Northeast and West saw declines due to affordability challenges in those higher-cost regions.
“While modest sales growth might not stir excitement, it shows slow and steady progress from the lows of late last year,” said Yun, in the report.
Ongoing Affordability Challenges Could Throw Cold Water on Spring Home-Buying Hopes
Though down from its 2023 high of 7.79%, the average 30-year fixed mortgage rate in 2024 remains well over 6% amid rising home values. As a result, home buyers continue to face affordability challenges.
According to data from its first-quarter 2024 U.S. Home Affordability Report, property data provider Attom found that median-priced single-family homes remain less affordable than the historical average in over 95% of U.S. counties.
For one, the data uncovered that expenses are eating up more than 32% of the average national wage. Common lending guidelines require monthly mortgage payments, property taxes and homeowners insurance to comprise 28% or less of your gross income.
At the same time, home prices and homeownership expenses continue to outpace wage growth.
Consequently, the latest expense-to-wage ratio is hovering at one of the highest points over the past decade, according to the Attom report, despite some slight affordability improvements over the last two quarters.
“Affording a home remains a financial stretch, or a pipe dream, for so many households,” said Rob Barber, CEO at Attom.
Pro Tips for Buyers and Sellers
Here are some expert tips to increase your chances for an optimal outcome in this tight housing market.
Pro Tips for Buying in Today’s Real Estate Market
Hannah Jones, a senior economic research analyst at Realtor.com, offers this expert advice to aspiring buyers:
Know your budget. Instead of focusing on price, figure out how much you can afford as a monthly payment. Your monthly housing payment is influenced by the price of the home, your down payment, mortgage rate, loan term, home insurance and property taxes.
Be flexible about home size and location. Perhaps your budget is sufficient for a small home in your perfect neighborhood, or a larger, newer home further out. Understanding your priorities and having some flexibility can help you move quickly when a suitable home enters the market.
Keep an eye on the market where you hope to buy. Determine the area’s available inventory and price levels. Also, pay attention to how quickly homes sell. Not only will you be tuned in when something great hits the market, you can feel more confident moving forward with purchasing a well-priced home. A real estate agent can help with this.
Don’t be discouraged. Purchasing a home is one of the largest financial decisions you’ll ever make. Approaching the market confidently, armed with good information and grounded expectations will take you far. Don’t let the hustle of the market convince you to buy something that’s not in your budget, or not right for your lifestyle.
Pro Tips for Selling in Today’s Real Estate Market
Gary Ashton, founder of The Ashton Real Estate Group of RE/MAX Advantage, has this expert advice for sellers:
Research comparable home prices in your area. Sellers need to have the most up-to-date pricing intel on comparable homes selling in their market. Know the market competition and price the home competitively. In addition, understand that in some price points it’s a buyer’s market—you’ll need to be prepared to make some concessions.
Make sure your home is in top-notch shape. Homes need to be in great condition to compete and create a strong “online curb appeal.” Well-maintained homes and attractive front yards are major features that buyers look for.
Work with a local real estate agent. A real estate agent or team with a strong local marketing presence and access to major real estate portals can offer significant value and help you land a great deal.
Don’t put off issues that require attention. Prepare the home by making any repairs or improvements. Removing any objections that buyers may see helps focus the buyer on the positive attributes of the home.
Will the Housing Market Crash in 2024?
Despite some areas of the country experiencing monthly price declines, the likelihood of a housing market crash—a rapid drop in unsustainably high home prices due to waning demand—remains low for 2024.
“[T]he record low supply of houses on the market protects against a market crash,” says Tom Hutchens, executive vice president of production at Angel Oak Mortgage Solutions, a non-QM lender.
Moreover, experts point out that today’s homeowners stand on much more secure footing than those coming out of the 2008 financial crisis, with many borrowers having substantial home equity.
“In 2024, I expect we’ll see home appreciation take a step back but not plummet,” says Orphe Divounguy, senior macroeconomist at Zillow Home Loans.
This outlook aligns with what other housing market watchers expect.
“Comerica forecasts that national house prices will rise 2.9% in 2024,” said Bill Adams, chief economist at Comerica Bank, in an emailed statement.
Divounguy also notes that several factors, including Millennials entering their prime home-buying years, wage growth and financial wealth are tailwinds that will sustain housing demand in 2024.
Even so, with fewer homes selling, Dan Hnatkovskyy, co-founder and CEO of NewHomesMate, a marketplace for new construction homes, sees a price collapse within the realm of possibility, especially in markets where real estate investors scooped up numerous properties.
“If something pushes that over the edge, the consequences could be severe,” said Hnatkovskyy, in an emailed statement.
Will Foreclosures Increase in 2024?
In February, total foreclosure filings were down 1% from the previous month but up 8% from a year ago, according to Attom.
“These trends could signify evolving financial landscapes for homeowners, prompting adjustments in market strategies and lending practices,” said Barber, in a report.
Lenders began foreclosure on 22,575 properties in February, up 4% from the previous month and 11% from a year ago. Meanwhile, real estate-owned properties, or REOs, which are homes unsold at foreclosure auctions and taken over by lenders, spiked year-over-year in three states: South Carolina (up 51%), Missouri (up 50%) and Pennsylvania (up 46%).
Despite foreclosure activity trending up nationally and certain areas of the country seeing notable annual increases in REOs, experts generally don’t expect to see a wave of foreclosures in 2024.
“Foreclosure activity is still only at about 60% of pre-pandemic levels … and isn’t likely to be back to 2019 numbers until sometime in mid-to-late 2024,” says Sharga.
The biggest reasons for this, Sharga explains, are the strength of the economy—we’re still seeing low unemployment and steady wage growth—along with excellent loan quality.
Massive home price growth in homeowner equity over the past few years has also helped reduce foreclosures.
Sharga says that some 80% of today’s homeowners have more than 20% equity in their property. So, while there may be more foreclosure starts in 2024—due in part to Covid-era mortgage relief programs phasing out—foreclosure auctions and lender repossessions should remain below 2019 levels.
When Will Be the Best Time To Buy a Home in 2024?
Buying a house—in any market—is a highly personal decision. Because homes represent the largest single purchase most people will make in their lifetime, it’s crucial to be in a solid financial position before diving in.
Use a mortgage calculator to estimate your monthly housing costs based on your down. But if you’re trying to predict what might happen next year, experts say this is probably not the best home-buying strategy.
“The housing market—like so many other markets—is almost impossible to time,“ Divounguy says. “The best time for prospective buyers is when they find a home that they like, that meets their family’s current and foreseeable needs and that they can afford.”
Gumbinger agrees it’s hard to tell would-be homeowners to wait for better conditions.
“More often, it seems the case that home prices generally keep rising, so the goalposts for amassing a down payment keep moving, and there’s no guarantee that tomorrow’s conditions will be all that much better in the aggregate than today’s.”
Divounguy says “getting on the housing ladder” is worthwhile to begin building equity and net worth.
Frequently Asked Questions (FAQs)
Will declining mortgage rates cause home prices to rise?
Declining mortgage rates will likely incentivize would-be buyers anxious to own a home to jump into the market. Expect this increased demand amid today’s tight housing supply to put upward pressure on home prices.
What will happen if the housing market crashes?
Most experts do not expect a housing market crash in 2024 since many homeowners have built up significant equity in their homes. The issue is primarily an affordability crisis. High interest rates and inflated home values have made purchasing a home challenging for first-time homebuyers.
Is it smart to buy real estate before a recession?
If you’re in a financial position to buy a home you plan to live in for the long term, it won’t matter when you buy it because you will live in it through economic highs and lows. However, if you are looking to buy real estate as a short-term investment, it will come with more risk if you buy at the height before a recession.
“Mortgage rates rose in February, and the elevated rates took a bite out of new home sales,” said Holden Lewis, home expert at NerdWallet. “They declined slightly from the previous month, although sales were 6% stronger than 12 months earlier. Builders are competing with home resales by constructing new homes for buyers on a limited … [Read more…]
Rather than easing back from the January level as expected, existing home sales shot significantly higher in February, The National Association of Realtors® (NAR) said pre-owned single-family houses, townhouses, condominiums, and cooperative apartments sold at a seasonally adjusted annual rate of 4.38 million units. This is an increase of 9.5 percent from the 4.0 million unit pace the previous month and the largest monthly increase since last February. Sales still trailed that month’s 4.53-million-unit rate by 3.3 percent.
Analysts polled by Econoday had a consensus estimate for sales of 3.92 million units while Trading Economics had projected the rate at 3.94 million.
Single-family home sales grew to a seasonally adjusted annual rate of 3.97 million in February, a 10.3 percent gain, but were down 2.7 percent year-over-year. The annual sales rate for condos and coops (410,000 units) was 2.5 percent higher than in January, but 8.9 percent below the February 2023 pace.
Despite the increase in sales, the number of homes available for sale also climbed, rising 5.9 percent from January and 10.3 percent from the previous February to 1,07 million units. This is estimated at a 2.9-month supply at the current rate of sales. Still, inventory remains well below the five-to-six-month supply considered a balanced market.
The median existing home price for all housing types in February was $384,500, an increase of 5.7 percent from $363,600 a year earlier. It was the eighth consecutive month of year-over-year price gains and was the highest price ever recorded for the month of February. The median price for a single-family home was $388,700, a 5.6 percent annual increase while condos appreciated by 6.7 percent to a median of $344,000.
First-time buyers were responsible for 26 percent of the month’s sales and individual investors or second-home buyers accounted for 21 percent. Thirty-three percent of sales were all-cash. Properties typically remained on the market for 38 days in February, up from 36 days in January and 34 days in February 2023.
Sales rose in three of the four major regions compared to January but remained below the pace a year earlier in all four. For the fourth consecutive month, the Northeast posted a sales rate of 480,000 units. This was 7.7 percent below the previous February’s number. The median price in the Northeast was $420,600, an increase of 11.5 percent from one year ago.
“Due to inventory constraints, the Northeast was the regional underperformer in February home sales but the best performer in home prices,” NAR chief economist Lawrence Yun said. “More supply is clearly needed to help stabilize home prices and get more Americans moving to their next residences.”
In the Midwest, existing home sales rose 8.4 percent to an annual rate of 1.03 million, a 3.7 percent deficit year-over-year. The median price moved higher by 6.8 percent to $277,600.
Existing home sales in the South jumped 9.8 percent from January to an annual rate of 2.02 million, down 2.9 percent from one year earlier. The median price in the South was $354,200, up 4.1 percent from last year.
The greatest increase was in the West with a surge of 16.4 percent compared to January. The annual rate of 850,000 units was 1.2 percent below sales the prior year. Prices also surged, rising 9.1 percent to $593,000.
National Association of Home Builders (NAHB) analyst Fan-Yu Kuo, writing in the Eye on Housing blog compared results of NAR’s Pending Home Sales Index (PHSI), a measure of signed purchase contracts thought to be a leading indicator of existing home sales, to recent completed transactions. Kuo said the PHSI fell from 78.1 to 74.3 in January. On a year-over-year basis, pending sales were 8.8 percent lower than a year ago per the NAR data.
Builder confidence rose for the fourth straight month and residential construction stats may now be trying to catch up. Both construction permits and housing starts rose in February compared to both January and February 2023 levels.
The U.S. Census Bureau and the Department of Housing and Urban Development (HUD) said new residential construction began on a seasonally adjusted pace of 1.521 million units last month. This is 10.7 percent higher than the 1.374 million units reported in January and 5.9 percent more than the level a year earlier.
Single-family starts rose 11.6 percent for the month to a rate of 1.129 million units and were up 35.2 percent year-over-year while multifamily starts increased by 8.5 percent. They retreated however by 35.9 percent on an annual basis.
On a non-seasonally adjusted basis, construction started on 108,100 units during the month, 79,200 of which were single-family houses. The January numbers were 97,400 and 69,700 respectively.
Permitting also increased, although not as dramatically. Authorizations were at a seasonally adjusted level of 1.518 million, 1.9 percent higher than the 1.489 million estimate the previous month. The year-over-year change was +2.4 percent.
Single-family permits were up 1.0 percent to 1.031 million, 29.5 percent higher than a year earlier. Multifamily permits increased 2.4 percent but lagged the prior February by 32.8 percent.
Permits issued during the month totaled 118,300, up from 114,800. Single-family permits increased from 75,900 to 79,300.
Analysts were on target with their forecasts. Those polled by Econoday had consensus estimate of 1.449 million for starts and 1.500 million for permits.
There were an estimated 124,100 residential units completed in February compared to 97,300 in January. Of those, a respective 81,000 and 61,000 were single-family units. On a seasonally adjusted basis, completions increased 19.7 percent from January and 9.6 percent for the year.
The National Association of Home Builders (NAHB) said its index measuring home builder perceptions of the new home market climbed back above the key level of 50 this month. The NAHB/Wells Fargo Housing Market Index rose 3 points to 51, the highest level since July 2023 and the first time it has surpassed the 50 mark since last July. NAHB economist Robert Dietz said builders are responding to the strong demand for housing and mortgage rates which are below the peak reached last fall.
The HMI survey asks builders for their perception of current single-family home sales, sales expectations for the next six months, and current traffic of prospective builders. The scores for each component form an index where any number over 50 indicates that more builders view conditions as good than poor.
All three indices posted gains in March. The HMI index charting current sales conditions increased 4 points to 56, the component measuring sales expectations in the next six months rose 2 points to 62 and the component gauging traffic of prospective buyers increased 2 points to 34.
Dietz also noted that the slightly lower rates are allowing builders to cut back on discounting to boost sales. In March, 24 percent of builders reported cutting home prices, down from 36 percent in December 2023 and the lowest share since July 2023. However, the average price reduction in March held steady at 6 percent for the ninth straight month. Meanwhile, the use of sales incentives is holding firm. Sixty percent of builders offered some form of incentive in March. That share has remained between 58 percent and 62 percent since last September.
Looking at the three-month moving averages for regional HMI scores, the Northeast increased 2 points to 59, the Midwest gained 5 points to 41, the South rose 4 points to 50 and the West registered a 5-point gain to 43.
The Census/HUD report estimates there were 1.666 million residential units under construction at the end of February, 683,000 of them single-family houses. In addition, builders have a backlog of 270,000 permits including 141,000 for single-family residences.
Starts in the Northeast region were down 10.3 percent from January but 16.2 percent higher than the previous February. Permits rose 36.2 percent from January and surged 79.6 percent compared to February 2023.
The Midwest saw gains of 16.4 percent from the prior month and 23.2 percent for the year. Permits increased by 3.8 and 14.9 percent.
Housing starts jumped 15.7 percent and 11.5 percent from the two earlier periods in the South. Permitting dipped by 1.3 percent from January and 5.1 percent for the year.
The West lost ground, with starts falling 7.9 percent and 10.8 percent for the month and the year respectively. Permits were also lower, by 6.8 and 11.2 percent.
Amid a housing shortage and an affordability crisis, US homebuilding heated up in February as builders anticipate demand for new homes to stay strong.
One sure way to improve affordability is to increase the availability of apartments to rent and homes to buy. In areas of the country where there has been robust homebuilding, rents and home price increases have been more moderate.
The pace of new housing starts soared by 10.7% in February from the month before, after slumping in January, according to data released Thursday by the Census Bureau and the Department of Housing and Urban Development.
Starts rose to a seasonally adjusted annual rate of 1.521 million units last month, beating analysts’ estimates of 1.425 million. The pace rebounded from January’s revised pace of 1.374 million and was 5.9% above the 1.436 million pace a year ago.
Meanwhile, the pace of new building permits was up 1.9% from January, which was up 2.4% from a year ago.
Homebuyers look to new construction for much-needed inventory
While the number of existing homes on the market remains historically low, new construction has provided a critical alternative for homebuyers.
Mortgage applications for a newly constructed home were up a whopping 15.7% in February from a year ago, according to the Mortgage Bankers Association; and up by 1% from January. The average loan size jumped to its highest level since last March at almost $406,000, but it was still below the record high of more than $436,000 in April 2022.
“It is possible that we could see more wiggle room on pricing in the coming months, as the inventory of existing homes begins to expand,” said Lisa Sturtevant, chief economist at Bright Multiple Listing Service, in a statement.
Prospective homebuyers who are looking at new construction are still finding some builders offering concessions, upgrades, or favorable financing terms, she said.
But, according to the NAHB, fewer builders are offering price cuts.
Homebuilders are preparing for when rates are lower
The much lower mortgage rates that many homebuyers expected have yet to materialize, but builders want to be ready for when that does happen.
Mortgage rates have come down from their highest levels of last year — 7.79% in October — and are now about a full percentage point below that, at 6.74%.
“Lower mortgage rates are likely to bring buyers to the market in larger numbers, and builders are ramping up supply to meet this demand,” said Kelly Mangold of RCLCO Real Estate Consulting, in a statement.
While existing home inventory has ticked up lately, as is typical this time of year, there is still a historically low number of homes on the market as owners see the gap between their ultra-low rate and prevailing rates as still too wide.
That creates an opportunity for homebuilders who can provide inventory.
“Homebuilders continue to be bullish about the spring market as homeowners are still reluctant to list their homes for sale and new homes account for an outsized share of the active inventory,” said Sturtevant.
Homebuilder confidence improved this month even as mortgage rates climbed, according to a survey from the National Association of Home Builders released Monday.
The lack of existing inventory that continues to push buyers toward new home construction led homebuilder sentiment index to the highest level since July and marked the fourth consecutive monthly gain for the index.
Addressing the housing shortage
Housing affordability amid high inflation and elevated interest rates remains a hot-button issue for the White House as well as the Federal Reserve.
President Joe Biden is set to address the housing shortage Tuesday in a speech from Las Vegas, where the cost of rent has increased 30% from before the pandemic and the cost to buy a home has risen by over 40% since then.
Biden is expected to call on Congress to pass legislation that he says could result in the building and renovation of more than 2 million homes to close the housing supply gap and lower housing costs.
Housing experts agree there are not enough homes available to rent or own compared to the demand. But the size of that gap ranges from a shortfall of 1.5 million units (according to National Association of Home Builders) to 5.5 million units (according to the National Association of Realtors) or as many as 7 million (according to the National Low Income Housing Coalition and Realtor.com), depending on who is calculating it and what assumptions about housing are being made.
Mortgage rate buydowns may not be as hot an incentive in 2024 as mortgage rates remain elevated, homebuilder sentiment climbs, and housing starts decline. Yahoo Finance Housing Reporter Dani Romero details major housing players’ decision to offer fewer incentives to buyers, referencing the latest data out from the National Association of Home Builders (NAHB).
For more expert insight and the latest market action, click here to watch this full episode of Yahoo Finance Live.
Editor’s note: This article was written by Luke Carberry Mogan.
Video Transcript
[AUDIO LOGO]
– The housing market narrative is shifting compared to last year driving home builders to weigh the option of withdrawing incentives for buyers. Yahoo Finance’s very own Dani Romero is here with the details. Dani.
DANI ROMERO: Josh will this be the year that we say sayonara to those aggressive incentives like the mortgage rate buy downs which is when the builder upfronts the cost to lower the rate on the loan. The answer is, we’ll see, mortgage rates are rising. So that’s really squeezing the hope that a lot of people had that this spring selling season would be the turnaround story for the housing market.
Now the biggest homebuilders, Lennar, DR Horton, they have really signaled that they are not going to pull back on incentives. And that is really their winning shot in this game to gain the market share, which they’ve already been doing and for some perspective, DR Horton actually offers mortgage rates about one point below market rates.
So that means you could gain a mortgage rate around 5% and that’s really attractive in this market. On the other hand KB Home signaled that they will not be pulling back on incentives. But that is also before we had all this inflation data come out. So that also is part of this equation as well.
Bottom line, builders are really looking at each other and trying to see who’s going to make the first move.
– Who’s going to blink first. Let’s talk about housing starts, which we got today, sliding in January, mortgage rates of course ticking higher this week. So how does that fit into the narrative? I mean, we were looking for some relief that doesn’t feel like relief necessarily.
DANI ROMERO: Today’s housing starts the data that came out really reflects the wintry weather, not necessarily the pullback in builder confidence. Remember builders need good weather to build and that does complicate the story in the winter months. So and for some perspective, the biggest drop in housing starts was actually the regions that were hit by winter storms.
So for example in the Northeast, housing starts were down by 20%, month over month. So that really does give you some perspective that certain regions were really hit by some of the storms. But looking ahead economists are really expecting that single family starts will gain momentum.
And the fact that the new home market is still looking like that, really bright spot in this housing market, especially that these builders will continue to offer these incentives, like those mortgage rate buy downs. I mean, 5% looks really great right now.
– Yes it really does. Thank you so much, Dani. I appreciate it.
Housing starts came in lower than estimates in the first month of the year, as the cold winter dampened activity. New construction starts fell to a seasonally adjusted annual rate of 1.331 million units, down 14.8% month over month, according to a report released Friday by the U.S. Census Bureau and the U.S. Department of Housing and Urban Development (HUD).
Housing starts in January also fell by 0.7% on an annual basis. Single-family housing starts dropped 4.7% from December to a rate of 1.004 million units. However, they were 22% higher than a year ago, surpassing the 1 million mark for the third straight month. Multifamily starts fell to a rate of 314,000.
The rate at which building permits were issued in January was down 1.5% monthly but up 8.6% annually to a rate of 1.470 million. Notably, the number of single-family authorizations was up 1.6% month over month in January to a rate of 1.015 million units, the highest level since May 2022. Meanwhile, multifamily authorizations were down month over month to a rate of 405,000 units.
Housing completions also sunk compared to December, falling 8.1% to 1.416 million units. Single‐family housing completions fell by 16.3% between December and January, at a rate of 857,000. Meanwhile, multifamily completions came in at a rate of 538,000 in January.
The regions that suffered the most winter storms posted the biggest declines in January. New starts in the Northeast and the Midwest fell 20.6% and 30% month over month, respectively.
Housing inventory remained low in January and new homes still accounted for about 30% of all homes available for sale.
“This spring, there will be more new listings coming onto the market though buyers will still outnumber sellers and there will still be robust demand for new homes,” Bright MLS Chief Economist Lisa Sturtevant said in a statement.
Despite the drop in January, homebuilders are feeling optimistic about the season to come. In fact, homebuilder confidence shot up to a five-month high in February, according to the National Association of Home Builders’ most recent survey.
Even though the National Association of Home Builders (NAHB) reported the third consecutive increase in its measure of home builder confidence, actual residential construction activity fell. The residential construction report for January shows both the rate of permitting and housing starts declined from the previous month, the second straight loss for starts.
The U.S. Census Bureau and the Department of Housing and Urban Development said construction began on residential properties at a seasonally adjusted annual rate of 1.331 million units. This was down 14.8 percent from the December rate of 1.562 million. The December rate was, however, a substantial upgrade from the 1.460 million units originally reported. On a year-over-year basis, starts were almost flat, with a decline of 0.7 percent.
Single-family starts fell 4.7 percent to an annual rate of 1.004 million units but that was an improvement of 22.0 percent from the prior January. Multifamily starts, at 314,000 units, were down 35.8 percent from December and 37.9 percent on an annual basis.
On an unadjusted basis, the report says there were 93,700 units started during the month, 68,700 of them single-family houses. The December numbers were 108,800 and 72,300, respectively.
The setback for permitting was more modest. Total authorizations were at an annual rate of 1.470 million, a 1.5 percent dip from 1.493 million in December and an increase of 8.6 percent for the year. The 1.015-million-unit rate for single-family houses marked a 1.6 percent gain for the month and 35.7 percent year-over-year. The permitting rate for multifamily units dropped 9.0 percent and 26.6 percent.
Analysts polled by Econoday overshot the mark for both starts and permits. They projected that starts would be at a rate of 1.470 million units and permits would come in at 1.510 million units.
Before seasonal and annual adjustments, permits were issued at a rate of 112,700, up from 104,900 the prior month. Single-family permits increased from 64,800 to 75,400.
NAHB said its Housing Market Index (HMI) rose another 4 points in February to 48. This is the highest reading since last August and represents a 14-point increase over the last three months. NAHB economist Robert Dietz said “Expectations that mortgage rates will continue to moderate in the coming months, the prospect of future rate cuts by the Federal Reserve later this year, and a protracted lack of existing inventory helped provide a boost to builder sentiment” over the last three months.
He added “Buyer traffic improved at the start of 2024, as even small declines in interest rates produce a disproportionate positive response among likely home purchasers. And while mortgage rates still remain too high for many prospective buyers, we anticipate that due to pent-up demand, many more buyers will enter the marketplace if mortgage rates continue to decline this year.”
The NAHB/Wells Fargo monthly survey of builders gauges their perceptions of current single-family home sales and sales expectations for the next six months as “good,” “fair” or “poor.” The survey also asks builders to rate traffic of prospective buyers as “high to very high,” “average” or “low to very low.” Scores for each component are then used to calculate a seasonally adjusted index where any number over 50 indicates that more builders view conditions as good than poor.
All three of the major HMI indices posted gains in February. The HMI index charting current sales conditions increased 4 points to 52, the component measuring sales expectations in the next six months rose 3 points to 60 and the component gauging traffic of prospective buyers increased 4 points to 33.
Looking at the three-month moving averages for regional HMI scores, the Northeast increased 3 points to 57, the Midwest gained 2 points to 36, the South rose 5 points to 46 and the West registered a 6-point gain to 38.
Those attitudes were not reflected in regional housing starts which declined across the board. They tumbled 20.6 percent in the Northeast compared to December and were 18.8 percent lower than in January 2023. The Midwest suffered a 30.0 percent loss although the region’s starts were up 10.9 percent for the year. The South had declines of 9.7 percent and 4.2 percent from the two earlier periods, while the West dropped by 15.7 percent month-over-month but was 11.4 percent higher than 12 months earlier.
The regional figures for permitting were more upbeat. The Northeast rose 19.4 percent and 4.5 percent for the month and year and the Midwest was up 6.6 percent and 18.0 percent. The South posted a monthly loss of 7.0 percent but was still up 3.9 percent for the year. Permitting in the West was 1.5 percent higher than in December and 16.7 percent above the previous January rate.
The residential construction report estimated that completions were running at a 1.416-million-unit rate in January, down 8.1 percent from the prior month. An estimated 96,300 homes were completed during the month, down from 148,000 in December.
At the end of January there were 1,676 million housing units under construction, 680,000 of them single-family houses, and a backlog of 267,000 permits.