U.S. existing home sales rise sequentially in March, homebuilders unlikely to raise construction in near-term

U.S. existing home sales rose sequentially in March. Sales were up 1.1 percent, rising to 5.6 million units, surpassing market projections of a modest rise of 0.2 percent sequentially. Home sales, on a year-on-year basis, stayed 1.2 percent below their year-ago level. The rise was widespread, as sales of single-family homes, as well as condos/ co-ops rose sequentially by 0.6 percent and 5.1 percent, respectively.

Activity was mixed throughout the nation. Sales fell modestly in the South and the West, reversing some of the large rises witnessed in February. In the meantime, activity rebounded in the Northeast and Midwest in March, after previously falling for three straight months. Still, in both regions sales continue to be below their year-ago level, especially in the Northeast, where they are 9 percent lower than their March 2017 level.

Prices continued to rise rapidly, accelerating in March with the beginning of the busy spring buying season. The median price of an existing home rose 5.8 percent year-on-year, up from 5.5 percent rate seen in February. Increasing prices reflect the continued tight supply conditions prevailing in the housing market, noted TD Economics. The inventory of homes available for sale was up 5.7 percent in March, 7.2 percent lower than a year ago.

The underlying story in the U.S. housing market continues to be widely unchanged, stated TD Economics. Deteriorating affordability on the back of rising mortgage rates and prices, and low supply of entry level houses is especially problematic for first-time homebuyers.

“Unfortunately, given the quickly rising costs for construction material and labor, homebuilders are unlikely to ramp up construction sufficiently in the near-term to provide a meaningful reprieve for the first-time buyers, said TD Economics. 

Resale activity in the Northeast have been impacted by inclement weather and new tax regulations. But it seems that the market is finding its footing after a three-month long hiatus.

“Still, even as the weather improves, the impact of the tax changes will continue to weigh on price growth and resale activity in the region”, added TD Economics.

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