Small drops in mortgage rates helped lift sales of new U.S. homes despite persistent economic concerns, but the increase could be short-lived, analysts warn.
March new home sales totaled a seasonally adjusted annual rate of 724,000, meaning that many homes would change hands over the next 12 months at this pace, according to a report released Wednesday by the U.S. Census Bureau and the Department of Housing and Urban Development. The rate, the highest since September, is 7.4% above the revised February figure and 6% above the same month last year.
“The March new home sales data shows that demand continues to be present in the market, provided affordability conditions permit a purchase,” said Buddy Hughes, chairman of the National Association of Home Builders, in a statement. “An increase in economic certainty would be a big boost to future sales conditions.”
Mortgage rates declined modestly during the latter part of January into February and March, and have remained below 7% for 13 consecutive weeks, according to mortgage giant Freddie Mac. Still, rates averaged 6.83% in the week ended April 17, up from the previous week’s 6.62%. It was the highest weekly average since February.
"All told, the stronger pace of sales registered in March is [an] encouraging sign that the new home market was not falling apart ahead of the new tariffs and associated market volatility," Wells Fargo said in a report also released Wednesday. "Moving forward, however, significantly reduced policy certainty, the recent bounce in mortgage rates and dimming economic growth prospects stand as formidable headwinds."
The banking giant cautioned that buyers still face sizable affordability challenges. It cites increases in materials costs from tariffs that the NAHB says raise the cost of a typical home by nearly $11,000.
"Lower margins may test builders' abilities to offer price cuts or other incentives to shore up demand," the report stated.
Some of the largest homebuilders, including Lennar, D.R. Horton and KB Home, have already said demand is soft and buyers are slow to commit due to affordability concerns. D.R. Horton lowered full-year earnings predictions by nearly $3 billion and dropped home sales expectations by 5,000 for the year.
Meanwhile, the median sales price of new houses sold in March was $403,600, down 7.5% from March 2024. The median number means half of the homes sold for more than $403,600, and half sold for less.
The NAHB defines a new home sale as when a buyer signs a contract or a builder accepts a deposit. The home can be in any stage of construction, from not started to complete.