Increased mortgage rates and home prices, as well as higher building expenses, all led to a drop in new home sales in February, but trends indicate that this will rebound later in the year.
According to freshly released statistics from the U.S. Census Bureau, sales of newly built single-family houses increased 1.1% in February to a seasonally adjusted annual rate of 640,000 from a downwardly revised reading in January. Department of Housing and Urban Development, as well as the U.S. Census Bureau. Yet, new home sales are down 19% year on year.
“Builders continue to face challenges in terms of higher interest rates, elevated construction costs, and access to critical materials such as electrical transformers,” said Alicia Huey, chairman of the National Association of Home Builders (NAHB) and a custom home builder and developer from Birmingham, Ala.
“The February new home sales data point to an increase in the monthly pace of single-family construction starts later in 2023, given a rise in builder sentiment and an increase in sales of homes that have not yet begun construction,” said NAHB Chief Economist Robert Dietz. “However, concerns remain about the recent stress on the banking system tightening credit conditions for acquisition, development, and construction loans for smaller builders.”
When a sales contract is signed or a deposit is accepted, a new home is sold. The house can be in any stage of construction: unfinished, under construction, or finished. In addition to compensating for seasonal impacts, the February reading of 640,000 units is the number of homes that would sell if this pace persisted for the next 12 months.
For the fifth month in a row, new single-family home inventories has decreased. At the current building rate, the February figure suggested an 8.2 month supply. A metric approaching a 6 months’ supply is considered balanced. Nonetheless, inventories of single-family resale homes is at a low of 2.5 months.
The typical new home sale price increased 2.5% year on year in February to $438,200. Home prices have risen as a result of rising construction expenses. A year ago, about 15% of new home sales were priced under $300,000, but that figure has already dropped to 10% of all homes sold.
Year to date, new house sales declined in all regions, with the Northeast down 29.2%, the Midwest down 21.3%, the South down 7.3%, and the West down 40.6%.
