The U.S. Census Bureau’s New Residential Sales February and March reports come out today at 10:00 a.m. The two reports will share the number of new homes sold each month, the amount of inventory left, and the median sales price. Compared to January, a small uptick in sales is expected but there will most likely be a year-over-year decline.
Sales could recover from the winter freeze
Many parts of the country were hit with storms that kept buyers indoors. And while the first quarter of the year is expected to have lower sales because of weather, February and March could show an uptick compared to January, when the storms were the worst.
We might see the first signs of the war’s impact in the March report
The March report will show the housing market’s initial reaction to the war. Mortgage rates had been steadily trending down since last summer and forecasts had anticipated a pick-up in both new and existing home sales this year. The war in Iran trended rates back up in March and existing home sales have already edged downward this year even before the impact of the higher mortgage rates.
Buying season could move the market faster
We typically see new home sales peak earlier in the year around March or April due to a combination of warm weather and people trying to move in before the school year starts. For new homes sales are recorded from signing the contract rather than at closing so the seasonal pattern is slightly different than existing home sales. New homes also take time to build depending on the stage of construction, so buyers are going to want to start the process earlier and we could see that reflected in the March numbers.
Lower mortgage rates are not enticing buyers as much as we expected
The year-over-year decline may have been one of the first signs that markets weren’t benefitting from lower mortgage rates as much as we anticipated at the end of the year. Existing home sales have also posted declines in the first quarter of the year. As the current 30 year fixed mortgage rate is 6.56%, people are not taking advantage of the lower rate as expected and the war could make it worse.
Expect revisions
The initial report often has errors making the immediate trend statistically insignificant until there are a couple of months with revisions to look at. The April report in combination with revisions on previous reports will provide a more composite view.