U.S. new-home sales unexpectedly increase to a one-year high

U.S. new-home sales unexpectedly increased in March to the highest level in a year, suggesting an easing in mortgage rates is helping the housing market find some footing.

Purchases of new single-family homes increased 9.6% to an annualized 683,000 pace last month from a downwardly revised 623,000 rate in February, government data showed Tuesday. The sales rate exceeded all but one estimate in a Bloomberg survey that had a median projection of 632,000.

With many homeowners hesitant to list their homes in the current rate environment, prospective buyers have increasingly turned to the new-home market. A firming of residential construction will help to shore up inventory, though current supply remains limited. Builders are using incentives and price reductions to improve affordability.

Mortgage rates also pulled back some in March, driving a pickup in mortgage applications for home purchases.

Sales picked up in the West, Midwest and Northeast.

There were 432,000 new homes for sale as of the end of last month, slightly lower than February and the fewest in nearly a year. That represents 7.6 months of supply at the current sales rate. The number of homes sold in March and awaiting the start of construction – a measure of backlogs – jumped to 168,000 last month, the highest in more than a year.

Earlier this month, Robert Dietz, chief economist at the National Association of Home Builders, said new construction now makes up a third of housing inventory, roughly three times the historical norm. Builder optimism has now also improved for four-straight months, after declining for a year.

The report, produced by the Census Bureau and the Department of Housing and Urban Development, showed the median sales price of a new home rose 3.2% from a year earlier to $449,800.

A separate measure of prices for the prior month earlier also pointed to a return in the normal seasonal trends that typically drive the real estate market’s busiest season, according to Nicole Bachaud, a senior economist at Zillow. Data from S&P CoreLogic Case-Shiller showed prices increased on a monthly basis in February after seven months of declines.

New-home purchases typically account for about 10% of the market and are calculated when contracts are signed. They are considered a timelier barometer than purchases of previously-owned homes, which are calculated when contracts close. Those sales fell in the month, retracing part of a February rebound, separate data showed last week.

The new-homes data are volatile; the report showed 90% confidence that the change in sales ranged from a 5.6% decline to a 24.8% increase.