U.S. New Home Sales Increase Amid Economic Concerns

WASHINGTON (Reuters) – Sales of new U.S. single-family homes increased more than expected in March as buyers rushed to take advantage of a decline in mortgage rates. However, a gloomy economic outlook poses a challenge to the housing market recovery.

New home sales jumped 7.4% to a seasonally adjusted annual rate of 724,000 units last month, the highest level since September 2024, according to the Commerce Department’s Census Bureau. The sales pace for February was revised down to 674,000 units from a previously reported 676,000 units.

Economists polled by Reuters had forecast new home sales, which make up about 14% of U.S. home sales, to climb to a rate of 680,000 units. New home sales are counted at the signing of a contract and saw a 6.0% year-on-year increase in March.

The average rate on the popular 30-year fixed mortgage declined to 6.65% in March from 6.76% at the end of February, as shown by Freddie Mac data. However, rates have since risen, touching a two-month high of 6.83% last week due to President Donald Trump’s fluctuating tariff policy, raising fears of sluggish economic growth and high inflation. Some economists doubt the Federal Reserve will resume cutting interest rates in June.

Federal Reserve Chair Jerome Powell suggested last week that the U.S. central bank was in no rush to move on rates but warned that Trump’s trade policy risked pushing inflation and employment further from the Fed’s goals. Trump’s attacks on Powell raised concerns over Fed independence, contributing to investors selling U.S. assets, including Treasuries. On Tuesday, Trump backed off from threats to fire Powell, which helped boost asset prices and lower Treasury yields. Mortgage rates track the yield on the benchmark 10-year Treasury note.

The National Association of Homebuilders estimated that the latest round of tariffs, including increasing duties on Chinese imports to 145% and imposing a 25% levy on foreign steel and aluminum, had raised construction costs by $10,900 per home. They expect weaker home sales over the next six months.

In March, new home sales increased in the densely populated South and Midwest, but fell in the Northeast and West. The median new house price dropped 7.5% to $403,600 in March from a year earlier, with most homes sold for under $499,999.

Inventory of new homes last month increased 0.6% to 503,000 units, the highest level since November 2007. At March’s sales pace, it would take 8.3 months to clear the new houses on the market, down from 8.9 months in February.