New home sales rose 7.2% in January from the previous month, thanks to a combination of falling mortgage rates and home prices, along with homebuilders’ willingness to offer sales incentives.
Key things
- New home sales rose 7.2% to 670,000 in January.
- Sales are still down nearly 20% from a year ago.
- Homebuilder confidence rises as new home sales pick up, gaining 7 points in February.
Sales reached 670,000 units in January, according to data released by the Department of Housing and Urban Development and the Census Bureau. While the increase was a sign of life for new home sales after a slow year, they were still down 19.4% from the same month a year earlier.
According to Alicia Huey, president of the National Association of Home Builders, 57% of home builders offered sales incentives, including mortgage rate buybacks and price reductions.
“Incentives for buyers, along with stabilizing mortgage rates during the month of January, increased the pace of new home sales for the month,” Huey said. “However, in a sign of the current weakness in the market, sales were down 19.4% compared to the previous year.”
Rising mortgage rates are still a cause for concern, according to the NAHB.
“Although new home sales rose slightly in January, the recent increase in mortgage rates would signal continued weakness in the coming months,” said Danushka Nanayakkara-Skillington, NAHB’s assistant vice president for forecasting and analysis. “In terms of affordability, the median price is down for the third month in a row and is lower than a year ago.”
The median sales price of new single-family homes was $427,000, down 8.2% from December. By region, sales in the Northeast fell 19.4%, matching the overall decline; 6.9% in the Midwest; and 7.3% in the West. The South was the only region where sales increased by 17.1%.
According to HUD and Census data, 439,000 new homes were still for sale at the end of January. The inventory of completed, ready-to-move-in single-family homes rose 115% from a year earlier, with 73,000 homes in January, although this type of inventory makes up only 17% of the total inventory.
As sales grow, home builders are more confident about the market, according to the NAHB/ Wells Fargo Housing Index. Homebuilder confidence in the single-family home market rose 7 points to 42 in February, the highest since September. While new home sales make up only about 10% of the market, it’s an important piece of the puzzle because the U.S. has a housing shortage of more than 5 million homes, according to the National Association of Realtors.
Sale of existing houses fell in January for the 12th month in a row, to the lowest level since October 2010. Economists had predicted the number would rise, not fall. Homeowners are reluctant to sell because they would have to borrow at a higher mortgage rate to buy another home.
