New Home Sales Rise in March as Prices Drop
New Home Sales Rise in March as Prices Drop
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Buyers, many of whom have been frustrated by the lack of homes on the market and even outbid on the abodes of their dreams, snapped up more newly built homes last month as prices fell.
March sales of never-before-lived-in, single-family houses were up nearly 6.7% over February and about 4.3% over the previous year, according to the U.S. Department of Commerce’s monthly new residential construction report. There were 48,000 new homes sold in March, according to the numbers in the report, which were not seasonally adjusted (in other words, the actual number of homes that were sold).
The median price of the new homes was $288,000, a nearly 3.2% drop from February and a 1.8% decline compared to a year earlier, according to the report.
“It’s an indication that new homes are being offered at lower price points to attract first-time buyers,” says realtor.com®’s chief economist, Jonathan Smoke.
That’s significant because buyers typically pay a premium for newly constructed homes, which tend to be larger and attract those with deeper pockets. New residences have become increasingly expensive to erect since the financial crisis as the costs of labor and materials rise at a time when it’s harder for builders to secure financing and permits.
“It’s difficult for builders to produce lower-price homes, and that’s why we’re not seeing bigger gains in sales,” Smoke says.
The bulk of sales, 37%, were in the still somewhat affordable $200,000 to $299,999 price range, according to the report. About 13% of the purchases were between $150,000 and $199,999, while 17% were in the $300,000 range.
Just 6% were under $150,000.
Nationally, the overwhelming majority of sales, about 31,000, were in the lower-priced South, according to the report.
The region has seen high job and population growth fueling demand, Smoke says. Land is also less expensive than up north or along California’s pricey coast, and there aren’t as many zoning and permitting hold-ups, he says.
Atlanta-area developers are scooping up whatever spare land they can to meet demand, says Jason Lapene, an Atlanta real estate agent who also sells homes in New Orleans and Miami.
“The amazing thing is, people are still buying homes located near interstate [highways] or electricity poles,” he says as builders scramble to put up residences on whatever scraps of land they can find. He’s seeing multiple bids on properties before ground is even broken in new subdivisions.
But he expects homeowners will pay for those purchases down the line when they try to sell the homes, which will no longer have that brand-new allure.
“Once it becomes a resale…buyers are going to opt for properties in more desirable places,” he says.
Demand is so high in the Southern hub that, contrary to the report, he’s seeing prices go up—instead of down.
“It’s a great place to live,” Lapene says of Atlanta. And “the cost of living is absolutely lower than New Orleans or [big cities in] Florida.”
Following the South, the next highest number of new homes was sold in the West at about 10,000 sales, according to the report. Next up was the Midwest, with about 6,000 sales, and the Northeast, with another 2,000 purchases.
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