New home sales dropped by 2% in February, declining for a second consecutive month, according to data from the U.S. Census Bureau and the Department of Housing and Urban Development.
Purchase of new single-family homes fell to a 772,000 annualized rate, down from a revised rate of 788,000 in January and 6.2% lower than the expected rate of 823,000.
These declines suggest American house hunters are taking a step back as interest rates and inflation rise.
The South and West, two regions that have been quite popular with homebuyers in the last year, saw sales decline, while the less popular Northeast and Midwest saw an increase in sales.
At month’s end, an estimated 407,000 new homes remained on the market, the most since 2008. This is a 6.3 month supply at the current sales rate. But more than 90% of those homes are still under construction or not yet started.
The number of homes sold but that haven’t begun construction rose to 209,000.
Home price appreciation remains a concern. The report showed the median sales price of a new home increased 10.7% year-over-year in February to $400,600.
Rising interest rates are also influencing potential buyers. Mortgage payments rose 31% YOY to $1,716 in February, the biggest increase ever recorded by Redfin. At the same time, purchase loan applications fell 2%, continuing a downward trend.
“The cost of housing is going up for homebuyers and renters, but it’s going up more quickly for homebuyers,” said Redfin Chief Economist Daryl Fairweather.
“That’s because mortgage rates have increased sharply, and will likely continue to do so. When the cost of homeownership increases, many potential homebuyers opt to rent instead, which drives up rental prices. Americans should brace themselves for continued inflation across the board and try to find ways to cut costs.”