A dip in mortgage rates and a backlog of empty homes helped power sales of newly constructed houses for the second-straight month in January, according to data released Friday by the U.S. Census Bureau.
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Sales of newly constructed homes surged between December and January, notching the strongest sales pace since at least March 2022, new data shows.
New-home sales clocked in at a seasonally adjusted rate of 670,000 units in January, 7.2 percent higher than in December but 12.4 percent lower than a year earlier, according to data released Friday by the United States Census Bureau.
The median sales price for a new home fell to $427,500 in January, down from $442,100 in December, while the average sales price plunged to $474,400, down from $528,400 in December.
The December median sale prices edged out January 2022’s price of $423,000, while the average sales price fell below the 2022 average of $496,000, according to the latest data.
Experts attributed the spike in new-home sales to a gradual decrease in mortgage rates in January when they leveled off at around 6 percent after exceeding 7 percent in November. Rates have since increased modestly in February, which may impact sales, according to Holden Lewis, a home and mortgage expert at the personal finance website NerdWallet.
“January marked a surge of people signing contracts to buy new homes,” Lewis said in a statement. “It was the strongest sales pace since March 2022, The increase in contract signings can be attributed to a decline in mortgage rates in January after a run-up in rates in October and November. Rates have bounced higher since January, which likely is acting as a drag on new home sales in the meantime.”
The seasonally adjusted estimate of new homes for sale at the end of January was 439,000, representing a supply of 7.9 months at the current sales rate, according to the census bureau.
New-home sales also increased in December, rising 5.8 percent from November, according to the data.
Buyers are entering a market defined by a backlog of newly constructed homes that builders have been eager to fill after a slow months-long period, and are offering incentives to buyers in order to move inventory more quickly.
“The backlog of new construction homes continues to emerge into the market just in time for the spring shopping season,” Nicole Bachaud, a senior economist at Zillow, said in a statement. “Many home builders are offering incentives to buyers, sweetening the deal just enough to bump sales from the month prior.”
Mortgage rates ticked down across January opening the door to some buyers who had been shut out by affordability constraints,” Bachaud added. “But a low flow of new listings from existing homes left buyers wanting for more, and new construction was able to step in and help fill the gap slightly.”
Although sales remain down from a year earlier, the market appears to be returning to normal, rather than the frenzy of a pandemic and market chaos that followed.
“Sales are still far below levels seen a year ago, but this market is settling into what could be the new normal, one with a slower pace than seen during the pandemic and with fewer homes on the market and fewer transactions largely led by the affordability crunch,” Bachaud said.