New home sales improved across the board in January, the U.S. Census Bureau and the Department of Housing and Urban Development said Monday. New home sales, which include buyers making a down payment or signing a sales agreement, increased 1.8% year over year to a seasonally adjusted 661,000 units. Sales were also 1.5% higher than December’s revised figure of 651,000 units.
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New home sales improve The picture was across the board in January, according to Monday’s data from the U.S. Census Bureau and the Department of Housing and Urban Development.
New home sales, which include buyers making a down payment or signing a sales agreement, increased 1.8% year over year to a seasonally adjusted 661,000 units. Sales were also 1.5% higher than December’s revised figure of 651,000 units.
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Several economists said the growth in new home sales, while modest, showed buyers were becoming more resilient amid rising mortgage rates. Sales in this segment are expected to remain strong into the spring buying season as builders offer a range of incentives, such as reduced prices to purchase.
Dr. Lisa Strtwant
“New home sales increased despite cold weather in January, reflecting continued strong demand,” Dr. Lisa Sturtevant, chief economist at Bright MLS, said in a written statement. “Mortgage rates remain a constraint as demand continues to be strong. They rose last week to their highest levels since mid-December, but homebuilders are still offering lower rates or other incentives to homebuyers.”
“In the new home market, builders are often able to lower mortgage rates for buyers, subsidizing mortgage payments and making it easier for them to buy a home,” she added. “Record profits in recent years have made it possible for builders to offer these deals.”
Kelly Mangold, head of real estate consulting at RCLCO, said a lack of existing housing stock would continue to drive new home sales for the foreseeable future.
Kelly Mangold
The National Association of Realtors’ January Existing Home Sales Report said the inventory of unsold existing homes stood at 1.01 million units, equivalent to a three-month supply at the current sales pace.
Meanwhile, the unsold inventory of new homes stands at 456,000 units – an 8.3-month supply at the current sales pace. New homes currently account for 30% of the total market inventory, which is 20% higher than the historical average for this sector.
“As concerns about a severe recession ease, buyers who have been on the sidelines for the past year or more are becoming more confident about buying,” Mangold said in an email to Inman. “As resale inventory Remaining tight, the new home market could meet pent-up demand from households looking for a space that better meets their needs.”
Sturtevant said that while there are many headwinds in the new home market, affordability will be a major question mark for homebuyers. The median new home price in January was $420,700; 11% higher than the median price of existing homes ($379,800).
“Affordability is a key factor in the 2024 market, with home prices still broadly rising and mortgage rates still high,” she said. “In January, the median new home was $420,000, up 1.8% from December, but still higher than last year.” It fell 2.6% over the same period. New home prices have fallen for the fifth consecutive month, but new homes are still more expensive than existing homes.”
Sturtevant said homebuilders must continue to hedge against rising mortgage rates and median prices by making strong concessions to buyers, especially if they want to take advantage of pent-up buyer demand this spring.
“Homebuilders (and homebuyers) were hoping to see mortgage rates fall in early 2024, but strong economic data suggests the Fed will delay a rate cut until later this year, keeping mortgage rates near 7%. levels,” she said. “Rates will fall later this year, but the timing will depend on labor market conditions, inflation and the Fed’s decision on when and how much to cut rates. “
Homebuilders will have to continue to offer deals, such as lower mortgage rates, lower prices or build smaller homes that can be built more cheaply, to combat growing affordability issues. “
Email Marianne McPherson
