New U.S. single-family home sales surprisingly dipped in February as mortgage rates rose, but the trend remained robust due to a chronic scarcity of previously owned homes. On Monday, the Commerce Department said that last month's median new house price was the lowest in more than 2-1/2 years and supply was the largest since November 2022.
Builders are increasing building, providing discounts, and shrinking floor plans to make housing more affordable. "Housing activity is stabilizing as homebuilders build cheaper, smaller homes," said Brean Capital senior economic advisor Conrad DeQuadros. "Sales have been relatively stable at December's level over the last two months and prices have been falling at mid-single-digit rates on a year-over-year basis."
The Commerce Department's Census Bureau reported 662,000 seasonally adjusted new home sales last month, down 0.3%. The January sales rate was raised to 664,000 from 661,000. New house sales, 13.1% of U.S. home sales, were expected to climb to 675,000 units by Reuters economists. New house sales are monitored at contract signing, making them a leading housing market indicator.
However, monthly volatility is possible. February sales rose 5.9% year-over-year. A shortage of previously owned homes has helped the new home market withstand 525 basis points of Federal Reserve interest rate hikes since March 2022. Home resales hit a one-year high in February, suggesting the housing market has turned a corner. However, supply remains low, keeping property prices high and homeownership out of reach.
According to Freddie Mac, the average 30-year fixed-rate mortgage rose to 6.94% in late February before falling to just below 7.0% by mid-March. The U.S. central bank may decrease rates this year. New home sales fell 31.5% in the Northeast and 2.4% in the Midwest last month. Sales rose 3.7% in the densely populated South and 2.3% in the West.
The National Association of Home Builders said last week that six-month sales reached a nine-month high in March. The buyer index was highest since August. The median new home price in February was $400,500, down 7.6% from June 2021. Economists said the median new house price drop was good for affordability and inflation. Higher housing rents have driven inflation.
Overall property prices grow due to the supply bottleneck in home resales. Last month, most new homes sold for $300,000–$399,000. Last Monday, the government announced February home completions at their highest level in 17 years. New home supply may further reduce house price inflation.
February had 463,000 new homes for sale, the largest since November 2022. This was up from 457,000 in January. At February's sales pace, it would take 8.4 months to sell all the residences, up from 8.3 months in January. Construction houses made up 58.7% of inventories. Supply consisted of 22.9% unbuilt homes and 18.4% completed homes.
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