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New Home Sales Up as Prices Rise

According to data released on Tuesday by the Department of Housing and Urban Development (HUD) and the Census Bureau, new home sales grew by 5.8 percent month-over-month in March, and 15.6 percent year-over-year.  The median home price rose to $315,000, while the average home price grew to $388,200.

Though inventory has been at a low point recently, the report found that in March inventory grew to 268,000. HUD and the Census Bureau estimate this to be a 5.2-month supply at the current sales rate.

“There is good news and bad news in this morning's New Residential Home Sales data release by the Bureau of the Census,” said Realtor.com Senior Economist Joseph Kirchner. “The good news is that new home sales jumped for the third month in a row, to about the same as last year's peak in July. Already this Spring market is challenging last year's high water mark. The bad news is that sales are increasingly concentrated at the mid- to upper-end of the price range. Sales of affordable new homes under $200,000 dropped to 12 percent from 17 percent of the market since last April. Home prices are climbing faster than incomes, and affordable and starter homes are few and far between. This is going to keep many would-be buyers on the sidelines.”

Affordability has already proven to be a problem for many buyers, especially given the low inventory. First American’s Real House Price Index (RHPI) for February 2017 showed home prices remaining strong, while the low inventory has meant that home prices have remained high. The RHPI revealed that home prices have dropped by 32.8 percent since the pre-recession peak, but are still at a relative high. Real house prices rose 0.7 percent between January and February.

However, wages grew 2.8 percent in February, offsetting the impact of rising home prices, which has influenced this month’s boost in sales.

About Author: Seth Welborn

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