March New Home Sales: Worse than Expected

• New home sales fell 15.4% from February and 9.5% from a year ago, to 627,000 (SAAR), according to the U.S. Census Bureau.
• The median sales price of new homes sold in March 2020 was $321,400.
• Inventory of new homes available for sale was up 2.8% from February but down 1.2% from March 2019.

Compared to existing home sales data released earlier this week, today's timelier March new home sales report offers a more-accurate glimpse into how the housing market has shifted as a result of the coronavirus outbreak – and even though sales through the first quarter remain up roughly 7% from Q1 2019, the news was worse than expected. The gains experienced thus far in 2020 are more about the strength of the market in January and February, prior to the U.S. coronavirus outbreak, and the relatively sluggish start to 2019.

Striking regional differences are also important to watch — sales in the South, which generally accounts for the lion’s share of new home sales, were down only modestly. But sales in the West and Northeast, regions hit earlier by the coronavirus outbreak and among the first to impose strict social distancing measures, fell dramatically. With widespread shutdowns spreading to the South and other regions toward the end of March, that likely sets the market up for an even worse April. It's a particularly disappointing turn for the new construction industry, which was in the midst of a stellar stretch that began in the summer of 2019 and continued into early 2020. Builders finally seemed to be gaining steam and were working hard to bring new supply to an inventory-starved market, and buyers were quickly snapping up the new homes being erected. Now, with sales waning, construction projects getting shelved and homebuilders' confidence plummeting alongside consumers', the once-hot market for new homes has been put into a deep freeze this spring.

A true thaw looks a ways off, though a recent uptick in mortgage applications, an emerging turnaround in pending home sales and signs of continued consumer interest in home buying offer at least some hope for those patient builders willing and able to play the long game.

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