By Laura Kusisto and Jeffrey Sparshott, Wall Street Journal
Updated April 25, 2017 11:32 a.m. ET
Sales of new homes increased sharply for the third consecutive month in March, an indication that demand is picking up as the crucial spring selling season heats up.
Purchases of newly built single-family houses, which account for about a 10th of overall U.S. home sales, increased 5.8% last month from February to a seasonally adjusted annual rate 621,000, the Commerce Department said Tuesday.
That was the strongest level since July, when sales reached a 9-year high.
The data were clouded by a margin of error of 15.5 percentage points that is much larger than the reported increase.
Still, momentum appears to be building in the market. New home sales have increased every month so far this year, and were up 15.6% year-over-year in March, slightly more than the margin of error in the report.
The median sales price for a newly built home rose just over 1% from a year ago to $315,100.
Economists expect new home sales to continue to increase this year as builders step up construction of single-family homes and more first-time buyers come back into the starter-home market.
Real-estate consultant John Burns said one reason the market for new homes hasn’t been stronger is that many of the big markets for new construction, such as Las Vegas and Phoenix, are only now starting to boom again.
“You need those big construction markets to take off,” Mr. Burns said. “It’s starting to pick back up in those markets, just off of a very low level.”
New construction has been sluggish since the recession, due to labor shortages, a lack of available credit to small home builders and, more recently, the rising cost of raw materials such as lumber. U.S. housing starts decreased 6.8% in March, although the overall trend in recent months has been one of acceleration in the pace of new construction.
The existing-home market has been going strong, although a shortage of supply is holding back sales numbers. Purchases of previously owned homes, which account for the vast majority of U.S. sales, increased 4.4% in March to their highest level in a decade, the National Association of Realtors said last week.
New-home construction has improved steadily over the past six years but remains well short of levels before and during the housing bubble. Over the past year, for example, builders have started construction on almost 792,000 single-family homes. From 1995 to 2000, a fairly normal stretch for the market, the average was 1.2 million a year.
By some measures the supply of inventory of new homes is more robust than that of existing ones. It would take just 3.8 months to exhaust the supply of previously owned homes on the market at the current sales pace, versus 5.2 months for new homes, Commerce said Tuesday.
The number of new homes for sale was the highest since July 2009.
Write to Laura Kusisto at email@example.com and Jeffrey Sparshott at firstname.lastname@example.org