New Home Sales, which measure signed contracts on new homes, surged 9.6% in March to a 683,000-unit annualized pace. This was much stronger than estimates of a 1% increase and the best number in the past twelve months. In addition, sales were just 3.4% lower than they were in March of last year.

The median sales price rose from $433,200 in February to $449,800 in March. Note that this figure is not the same as appreciation but represents the mid-price and can be skewed by the mix of sales among lower-priced and higher-priced homes.

What’s the bottom line? There were 432,000 new homes for sale at the end of March, which equates to a 7.6 months’ supply at the current sales rate. While this may sound like a large amount, a closer look shows that only 71,000 were actually completed, with the rest either not started or under construction. When comparing the pace of sales versus homes that were actually completed, there was only 1.2 months’ worth of available supply, which is well below a balanced market.

This disparity between the high demand for homes and tight supply of both existing and new homes will continue to be supportive of home prices.