After falling in February, signed contracts on new homes rebounded 8.8% in March to a 693,000-unit annualized pace, reaching their highest level since September. Sales were also 8.3% higher than a year earlier, as the persistent shortage of previously owned homes for sale continues to fuel demand for new construction.
What’s the bottom line? Despite the strong headline figure, some media pundits pointed to the decline in the median sales price, which was down nearly 2% from a year ago, to say the report was a miss. But the median sales price did not decline because of falling home prices (which continue to rise per Case-Shiller and other indexes), or a growing number of price cuts from builders. In fact, 36% of builders reported cutting prices in December, versus just 24% in March and 22% in April per the National Association of Home Builders.
The median sales price represents the mid-price of sales, meaning it’s influenced by the mix of sales in any given month. March’s decline in the median sales price stems from the sale of more homes at lower price points. Builders are constructing smaller, more affordable homes to meet buyer demand, and that pushed the median sales price lower comparatively.