Spring buying season lifts home sales in March as underlying demand offsets higher mortgages.
Home sales rose briskly in March, as pent-up demand for property continued to bolster the market ahead of a historically active spring buying season.
The sale of existing homes rose 4.4% in March to a seasonally adjusted 5.71 million units, the National Association of Realtors (NAR) reported last month. That was the highest level since February 2007. A monthly increase in listings supported a sharp rebound in closings, especially in the Northeast and Midwest.
The inventory of existing homes rose 5.8% at the end of March to 1.83 million units. At the current sales pace, unsold inventory is at a 3.8-month supply, NAR data showed.
New home sales, a more volatile segment of the market that accounts for roughly 10% of sales, rose 5.8% to a seasonally adjusted annual rate of 621,000 units. That was the fastest sales clip since July 2016. Official data also showed that new home sales were up 15.6% compared to year-ago levels.
Both segments of the market experienced much faster growth than analysts had expected.
Current sales conditions remain robust throughout the country, according to the latest homebuilder survey conducted by the National Association of Home Builders (NAHB). Although builder confidence declined slightly in April, a key measure of sales conditions held firm for a fifth consecutive month.
Sales are expected to intensify heading into a traditionally hot buying season as widespread shortages continued to boost demand for available property. Housing inventory has declined for 22 months on a year-over-year basis. Low inventories are expected to remain a challenge for the foreseeable future. Last month, the Commerce Department said housing starts fell 6.8% in March to a seasonally adjusted 1.22 million units. Building permits, a bellwether of future construction intentions, climbed 3.6% to a seasonally adjusted 1.26 million.
Property demand is being fueled by a tighter labor market and rising wages, which helped to offset growing affordability challenges at the end of the first quarter. Thirty-year fixed-rate mortgages climbed to three-and-a-half month highs in March, according to Freddie Mac. However, rates have since cooled roughly 30 basis points, including a brief drop below 4%.
With housing finance reform on the agenda, analysts say policy matters could dominate the real estate sector in the latter half of the year. House Republican legislation intended to replace the 2010 Dodd-Frank Act could be heading to the floor very soon, House Financial Services Committee chairman Jeb Hensarling recently said. The GOP is reportedly eyeing a swift overhaul of Frannie Mae and Freddie Mac, which have about a year to go before running out of capital.
For Fannie and Freddie to remain under conservatorship nearly a decade after their bailouts is “unacceptable,” Hensarling said.
Senate Banking Committee head Mike Crapo also suggested last week that reforming the housing finance system is on the agenda this year.
On March 20, President Trump issued an executive order directing the Treasury Secretary to begin reviewing the Dodd-Frank legislation. Recent activity on Capitol Hill suggests the Republicans are moving up the timetable for housing reform amid uncertainty about other legislative goals, such as tax reform and repealing the 2010 Affordable Care Act.
 National Association of Realtors (April 21, 2017). Existing-Home Sales Jumped 4.4% in March.
 National Association of Home Builders (April 17, 2017). Builder Confidence Holds Firm in April.
 Joseph Lawler (April 27, 2017). “Hensarling to move Dodd-Frank replacement next week, eyes Fannie and Freddie.” Washington Examiner.