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Sales of newly constructed single family homes remained mostly flat during February, marking only a modest increase ahead of the spring buying season, according to data released Thursday by the U.S. Census Bureau.
Sales of newly built single-family homes rose 1.1 percent between in February to a seasonally adjusted annual rate of 640,000, a 19 percent decline from February 2022, the data shows.
February was the third-consecutive month sales of newly built homes increased, according to the Census data.
The gradual increase seen over the past four months can likely be attributed to regular seasonal increases in homebuyer activity usually seen as the weather warms up. This year’s increases, however, are much smaller than those seen in previous years due to a 20-year high in mortgage rates.
“Rising mortgage rates had an impact on new sales contracts and deposits on new homes, as the January-to-February bump in new home sales activity was lower than it would be during a typical year,” Bright MLS Chief Economist Lisa Sturtevant said in a statement. “However, homebuilders are still feeling cautiously optimistic about a strong spring homebuying season, despite mortgage rate volatility and economic uncertainty.”
The median sale price for newly built homes in February was $438,200, up from the median of $427,500 in January. February’s average sale price was $498,700, up from January’s average of $474,400, according to the Census Bureau.
The seasonally adjusted estimate of new homes for sale at the end of February was 436,000, representing a supply of 8.2 months at the current sales rate.
On a month to month basis, sales of new homes rose 3 percent in the South and 8.1 percent in the West. They fell by 40 percent in the Northeast and by 1.4 percent in the Midwest, according to the Census Bureau.
Chris Rooney, an agent with RE/MAX Preferred in Prior Lake Minnesota told Inman he’s seen more competition for newly built luxury homes than he saw last year.
“We have seen buyers engaging in the bid process in the luxury market – homes over $1.8 million,” he said. “This is better than what we had last year.”
The National Association of Home Builders attributed the lackluster sales numbers to the challenges faced by homebuilders, such as high mortgage rates, high construction costs, and a scarcity of essential construction materials. The organization predicted an increase in demand for newly built homes later in the year though if interest rates subside due to a lack of inventory of existing homes.
“Builders continue to face challenges in terms of higher interest rates, elevated construction costs and access to critical materials like electrical transformers,” Alicia Huey, chairman of the NAHB said. “Nonetheless, the lack of existing home inventory means demand for new homes will rise as interest rates decline over the coming quarters.”
