US new home sales surged in March despite elevated mortgage rates

Sales of newly built single-family homes in the United States soared in March despite mortgage rates remaining elevated that month.

New home sales, which make up about 10% of the market, jumped 8.8% last month to a seasonally adjusted annual rate of 693,000, according to government figures released Tuesday. That trounced the 670,000 rate projected by economists, according to a FactSet poll, and was the strongest monthly increase since December 2022.

Sales of new homes increased across the country last month, rising the most in the Northeast region by a robust 27.8% from February.

Meanwhile, sales of existing homes, which make up the vast majority of the housing market, fell 4.3% in March to a seasonally adjusted annual rate of 4.19 million, the sharpest drop in more than a year, the National Association of Realtors reported last week.

Housing market poised to remain difficult

The broader US housing market is expected to remain tough for Americans, with mortgage rates poised to stay well above 6% this year, economists say. The Federal Reserve doesn’t directly set mortgage rates, but its actions do influence them, and the central bank isn’t expected to cut interest rates anytime soon. A persistent undersupply of housing also remains a key pressure point in the market, contributing to low affordability.

Housing inventory has improved in recent months, but supply still isn’t keeping up with demand. This means homebuyers have limited options as some homeowners who locked in a low mortgage rate before the Fed began to hike rates in 2022 largely prefer to not sell their homes.

“Despite high prices and mortgage rates, homebuyers have limited options on the resale market, although resale inventories have improved some over the course of this year,” Gregg Logan, managing director at RCLCO Real Estate Consulting, said in a note Tuesday.

“The willingness of the major homebuilders to utilize incentives such as price reductions, mortgage rate buy-downs and paying buyers closings costs continue to support a healthy pace of new home sales,” he added.

This story is developing and will be updated.