With the caveat that pretty much any economic data collected before April’s tariff bonanza should be taken with a grain of salt — salt that hopefully isn’t imported — the Census Bureau dropped some fresh numbers this morning on newly constructed home sales in March.
Turns out, sales were pretty strong last month, up 7.9% year over year. The median price for that new home smell was about $404,000 — not cheap, but about $30,000 cheaper than a year ago.
If you’re wondering who was buying newly built homes last month, especially with mortgage rates edging near 7% on a 30-year fixed, picture a couple of disheveled-looking parents touring a model home with a couple kids in tow, the ones with that desperate look on their faces that says, “I will pay absolutely anything to live in a home with more than one bathroom.”
“They’ve accepted that interest rates are going to be elevated, they’ve accepted the current environment that they’re in,” said Cara Lavender with the real estate company John Burns Research and Consulting. “They can’t wait any longer, they’re out of space.”
She said new construction has some advantages right now over older homes. Rising renovation costs make those affordable fixer uppers not-so affordable.
But the biggest advantage? With a new home, you actually may not have to pay 7% on that 30-year fixed after all.
“So one of the main things that’s pushing people to new homes over resale are the interest rate buydowns. And it’s something that the large builders, the public builders, really have the ability to buy down pretty significantly,” said Lavender.
Of course those interest rate buydowns cost homebuilders money — homebuilders that are seeing other costs start to rise.
Justin Wood builds mostly townhomes in Portland, Oregon. Here’s an email he got earlier this month from one of his suppliers.
“This is from my heating guy, he says, ‘Attached is your quote. We are expecting a 20% to 25% pricing increase on the ductless product, that’s after the end of April. I recommend we order all the equipment for this project ASAP,’” said Justin Woods.
A lot of HVAC components are made in China.
But Wood said even more than the tariffs themselves, it’s not knowing what headlines he’ll see tomorrow that’s really weighing on his business.
“I’d really like Washington, D.C., to figure out how to get things in, just our economy, to calm down a bit, you know, and just kind of move past some of the uncertainty,” said Wood.
Wood said that uncertainty really weighs on buyers, the ones willing to share that crowded bathroom a little while longer.