Sales of New Homes Tick Up in January
By Aarthi Swaminathan | Realtor.com
The numbers: Sales of newly built homes in the U.S. inched up in January, even as mortgage rates rose.
U.S. new-home sales rose 1.5% to an annual rate of 661,000 in January, from a revised 651,000 in the prior month, the Commerce Department reported Monday.
The number is seasonally adjusted and refers to how many homes would be built over an entire year if builders continued at the same pace every month.
The pace fell short of expectations on Wall Street. Economists had forecast new-home sales to total 680,000 in January.
Mortgage rates rose to a six-week high at the end of January, according to data from Freddie Mac, which might have held some buyers back.
Despite an increase in new-home sales in January, activity is still far below a recent peak of over 1 million in August 2020.
The rate of new-home sales was dragged down by weakness in the South.
The data from December was revised. New-home sales rose a revised 7.2% in December, compared with the initial estimate of an 8% increase.
The new-home sales data are volatile month over month and are often revised.
Key details: The median sales price of a new home sold in January rose to $420,700 from $413,200 in the prior month.
The supply of new homes for sale was flat between December and January.
Most of the nation reported an increase in sales of newly built homes, with the exception of a 15.6% drop in the South.
Overall, sales of new homes are up 1.8% compared with last year.
Big picture: The U.S. housing market is still lagging behind on the number of homes for sale as compared with pent-up demand, so newly built homes could continue to be a bright spot as home builders add fresh inventory.
But with mortgage rates rising over 7%, that could dampen home-buying demand, and some of that could already be showing up in the January figure.
Nonetheless, builders have in the past deployed a range of incentives to boost sales, from mortgage-rate buydowns to price cuts, which could offset the potential drop-off.
What are they saying? “The sharp fall in mortgage rates at the end of last year helped new home sales regain some more momentum in January. But so far the rebound has been slower than we were anticipating,” Thomas Ryan, property economist at Capital Economics, wrote in a note.
“Looking ahead, we still expect further falls in mortgage borrowing costs and the historically low supply of second hand homes on the market to drive demand towards newbuilds,” Ryan added.
Overall, amid the lack of supply of existing homes, “new home construction has been growing strongly and new home sales are currently accounting for 14-15% of total home sales versus 8-9% historically,” James Knightley, chief international economist at ING, said in a statement.
Market reaction: On the back of an increase in new-home sales, most major builder stocks like D.R. Horton, Lennar and Toll Brothers were up in the midday trading session, along with the SPDR S&P Homebuilders exchange-traded fund.