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New Home Sales and Prices in March

In each Economic Update, the Research staff analyzes recently released economic indicators and addresses what these indicators mean for REALTORS® and their clients. Today’s update discusses new home sales.

  • New home sales inched higher in March, now running at 18 percent above one year ago.  But the figures remain way down from peak levels.  A lack of new home construction has prevented new home sales from rising even higher.  Inventories of newly constructed homes for sale are essentially at 50-year lows. The lack of supply in relation has pushed up the new home prices in the first quarter to an all-time high, even above the levels seen during the bubble years.
  • The newly constructed home market makes up only 8 percent of the overall home sales market, with the remaining 92 percent being existing home sales.
  • The price gap between new and existing homes remain very wide compared to historical norms.  Even though existing home prices are recovering, the new home prices have to keep pace with construction and material costs.  The large gap also points to the relative attraction of existing homes and a plenty of room for further price improvements in the near future.
  • Homebuilders clearly need to get busy.  Those large builders who can tap Wall Street funds or have a reserve of cash are able to purchase lots and start building.  However most homebuilding activity in America has traditionally been performed by local small-time builders working with local community banks.  Unfortunately, the small guys are shut out because of the difficulty of obtaining construction loans.  Onerous regulatory burdens are said to prevent local community banks from providing the construction loans. Meanwhile, the stock prices of those big builders have been racing to the top.

Lawrence Yun, PhD., Chief Economist and Senior Vice President

Lawrence Yun is Chief Economist and Senior Vice President of Research at NAR. He directs research activity for the association and regularly provides commentary on real estate market trends for its 1 million REALTOR® members.

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