Market Recap: Existing Home Sales Up, Home Prices Appreciate, New Home Sales Surge
Mortgage rates trended slightly upward this week. Existing home sales increased month-over-month but declined year-over-year. Home prices continue to appreciate, as limited inventory strains for-sale availability. New home sales surged, and revisions to the previous two months’ reports indicate that buyer demand in the first quarter of 2018 was stronger than originally thought.
Existing home sales or resales increased from February to March but declined 1.2% from March of last year. Month-over-month, existing home sales are up 1.1% to a seasonally adjusted annual pace of 5.60 million. The Northeast led regional sales activity up 6.3%, followed by the Midwest, up 5.7%. Sales were down 3.1% in the west and down 0.4% in the South. The share of first-time home buyers entering the market edged slightly upward to 30%, however this figure is still significantly lower than the historical 40% first-time home buyers usually account for in the market. Although this is the second consecutive month of monthly gains, inventory constraints are pushing the housing market to a plateau.
The S&P CoreLogic Case-Shiller home price index continued to rise in February. Though the data lags by one month, it is still used to gauge home price appreciation trends. The 20-city index appreciated 6.3% annually, and 0.8% month-over-month. Larger metros like Seattle, Las Vegas, and San Francisco are seeing the most rapid appreciation, with each of those cities posting double-digit annual gains. CNBC reports home prices are rising at roughly double the pace of wages. Managing Director and Chairman of the Index Committee at S&P Dow Jones Indices, David Blitzer, explained, “with expectations for continued economic growth and further employment gains, the current run of rising prices is likely to continue.”
New home sales reached a four-month high in March, up 4% month-over-month and 10.3% higher year-over-year, to an annualized pace of 694,000. Gains were driven by the West, up 28.3%. The South improved moderately, up 0.8%. The Midwest and the Northeast each declined, with construction activity stalled by an unseasonably long winter. Based on this report, rising mortgage rates and home price appreciation have not impacted buyer demand.
Sustained buyer demand is driving construction activity, and with new home sales proportionately stronger than existing home sales, these trends are likely to continue. There are advantages of buying either an existing home or new home depending on the home buyer’s specific needs. Existing home sales transactions are typically faster and less expensive for buyers who are on a deadline or budget. However, when buying a new home, the buyer has an opportunity to build exactly what they want and many of the appliances and other components of the new home come with warranties. Before choosing to buy an existing or new home, it is best to consult with a mortgage professional to set a realistic budget and assess which type of home will meet your current and long-term financial goals.
Sources: Bloomberg, Bloomberg, CNBC, CNBC, MarketWatch, Mortgage News Daily