March sales unexpectedly rose – but how will tariff volatility affect the outlook for the months ahead?
The US housing market shook off tariff-induced fears about the economy’s future by posting an unexpected increase in March new home sales, getting the spring homebuying season off to a good start.
New single-family home sales were up by 7.4% last month, government data released Wednesday showed, and hit an annualized clip of 724,000 thanks mainly to a big uptick in activity in the South.
Lower mortgage rates and seller concessions were key reasons for that jump, which exceeded expectations of economists surveyed by Bloomberg, although the outlook for the coming months remains uncertain as the economy braces for the impact of President Trump’s global trade war.
Mortgage rates have climbed in recent weeks as US 10- and 30-year Treasuries rose in response to Trump’s flurry of tariffs against key trading partners, which include enormous levies against China.
But the March results were strong, bolstered by a recovery in the South after weather events weighed against its performance in the opening months of the year, and an increase in the Midwest – offsetting declines in the Northeast and West.
Lower home prices contributed to higher interest in homebuying. The median price of a home across the US dipped by 7.5%, falling to $403,600, while supply of new homes rose to 503,000.
Miki Adams of CBC Mortgage Agency highlights rising downpayment costs as a major hurdle for homebuyers, particularly first-timers, and stresses the importance of federal and private programs in overcoming affordability challenges.https://t.co/z3UIhaeTTI
— Mortgage Professional America Magazine (@MPAMagazineUS) April 21, 2025
Trade war could give hopeful buyers pause for thought in coming months
Cotality chief economist Selma Hepp highlighted the seasonal uptick but noted that home sales continue to trend below their 2024 levels even despite a significant jump in inventory.
“In addition, many markets with growing new inventories have also experienced a significant rise in existing inventories and weaking overall demand,” she said, “which is challenging homebuilders’ pricing power and poses the need for more incentives.”
A protracted trade war, meanwhile, could spike construction costs and continue putting upward pressure on mortgage rates, Hepp said – while borrowing costs could also feel the brunt of bond market chaos because of Trump’s hints about firing Federal Reserve chair Jerome Powell, even though the president appeared to dismiss that threat yesterday evening.
“In addition to homebuilders’ challenges stemming from potential tariff impacts and rising costs, the housing market is facing a repeated challenge from a recent jump in mortgage rates,” Hepp said, “which are likely to remain volatile and elevated, particularly considering the Federal Reserve’s independence being called into question.”
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