New home sales increased slightly month-over-month in February but remain down significantly from last year, according to new estimates from the U.S. Census Bureau and the Department of Housing and Urban Development.
Sales rose by 1.1% to a seasonally adjusted annual rate of 640,000, slightly less than economists’ expectations of 650,000. Bloomberg call this an “unexpected” rise after a downward revision in January, saying it may herald some stability after a wild year.
Sales remain down 19% YOY.
The seasonally‐adjusted estimate of new houses for sale was 436,000, representing a supply of 8.2 months at the current sales rate.
Newly built homes are gaining popularity as the supply of existing homes continues to cause trouble. Zillow says homebuyers are growing frustrated with limited options on the market thanks to high rates keeping homeowners in their houses longer.
“Even as builders continue to deal with stubbornly high construction costs and material supply chain disruptions, they continue to report strong pent-up demand as buyers are waiting for interest rates to drop and turning more to the new home market due to a shortage of existing inventory,” said National Association of Homebuilders Chairman Alicia Huey.
Buying a newly built home is still out of reach for many Americans.
Only 35.9 million out of a total of 132.5 million households are currently able to afford a newly built home based on 2022’s median price of $425,786.
Some buyers who can afford pricier homes moved quickly last month as interest rates declined in the wake of Silicon Valley Bank’s collapse. Mortgage applications picked up, and some buyers were able to lock in near- or sub-6% rates.
Home prices are beginning to moderate as demand dwindles.
Affordability remains a serious problem, but buyers who are still house hunting can score concessions from sellers and slightly cheaper price tags.
“Buyers today are way more demanding and selective. They’re willing to wait to find the perfect house, which wasn’t the case during the pandemic homebuying boom,” said Elena Fleck, a Redfin real estate agent in Palm Beach, FL.
“During the peak of Covid, it took two to three days to sell anything regardless of the condition, location, or square footage. Now, a home that’s not perfect may stay on the market for three to four months if the seller doesn’t throw in something to sweeten the deal.”
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