New home sales plunged 11.4 percent in March to a 481,000-unit pace, the first decline in 2015. The drop in sales, however, is at odds with improving builder sentiment and purchase application activity.
Weather Still Playing a Role in Sales Activity
- Home buying season is in full swing, but new home sales activity is not in tune with other housing market indicators. Following three straight monthly gains, new home sales fell more than expected in March to its lowest level since November. The sharp drop, however, is not indicative of the momentum in the housing market as sales are still shaking off the effect of unusually harsh winter weather conditions.
Purchase Applications on the Rise
- Along with rising builder sentiment, mortgage purchase activity is firming. Purchase applications rose more than 15 percent year over year, with increases in both conventional and governmentbacked loans. In fact, modifications to mortgage underwriting and the reduction in FHA mortgage insurance costs likely helped fuel recent gains in purchase applications. Lean inventories will likely be the largest hurdle for sales activity.
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