Real estate investors in the US have been buoyed by the uptick in sales of new single-family homes in March. According to the Commerce Department, the increase in sales by 9.6% to a seasonally adjusted annual rate of 683,000 units is the highest level since March 2022, likely due to a recent decline in mortgage rates. New home sales are considered a leading indicator of the housing market, although sales numbers can be volatile on a month-to-month basis.
Home buyers have been taking advantage of a welcomed dip in mortgage rates, which was mostly lower in March compared to a peak of 7.03% in late 2022, according to data from mortgage finance agency Freddie Mac. This trend is positive news for real estate investors, especially given the median new house price in March was $449,800, a 3.2% increase from a year ago.
While the Federal Reserve's recent interest rate hiking campaign has hit the housing market hard, there are signs that the worst of the housing market rout is over. Home builder sentiment continues to improve and single-family housing starts have also risen for two consecutive months in March, with permits for future construction increasing to a five-month high. Despite some challenges, the rise in new home sales indicates a positive trend for real estate investing in the US.
Real estate investors do still face challenges, with conventional banks tightening their lending standards, making it harder for homebuilders and homebuyers to access funding. However, the surge in new home sales bodes well for real estate investors in the US, indicating increased demand for single-family homes.