ConDig (24-Apr-19).  Sales of new single-family homes jumped up 4.5% in March to a 16-month  high as lower interest rates and wage growth underpinned stronger demand.

New home sales rose to a seasonally adjusted annual rate of 692,000 last month, up from 662,000 in February and 3% higher compared with the same period last year, according to latest figures from the Commerce Department.

“These numbers indicate that builders who can produce housing at affordable price points will experience sales growth,” said Greg Ugalde, chairman of the National Association of Home Builders (NAHB). 

“However, builders are still dealing with a shortage of construction workers and buildable lots, which limits housing affordability.”

The inventory of new homes for sale was 344,000 in March, representing a 6 months’ supply. The median sales price was $302,700 with strong gains in homes sold at lower price points. The median price of a new home sale a year earlier was $335,400.

A 30-year fixed mortgage rate was 4.17% last week, down from 4.94% in November, while average annual wage gains have hit 3% in recent months, according to the Labor Department. 

It comes as homebuilders remain positive, with the The National Association of Home Builders (NAHB)/Wells Fargo Housing Market Index (HMI) for newly-built single-family homes holding steady at 62 in March. But the index stood at 70 in March last year. Anything above 50 is considered positive.

But construction industry leaders continue to warn that rapidly rising materials costs and a deepening shortage of labor could delay some projects and make others financially unviable.

A rise in material costs has been exacerbated follow a decision by President Trump to slap a 25% tariff on imported steel and a 10% duty on foreign aluminum from Canada, Mexico and the European Union on May 31.