New Home Sales Slip As Existing Sales Surge

New home sales declined in February as existing sales surged, showing buyers still prefer affordable, older stock over new when it becomes available.

That’s according to data from the U.S. Census Bureau and the Department of Housing and Urban Development, which reported sales down by 0.3% to a seasonally adjusted annual rate of 662,000, slipping from the month priors’ revised rate of 664,000.

Sales were still up by 5.9% from the same time last year, however.

The decline was the first in three months and generally unexpected by analysts, according to Bloomberg. Surveyed economists had predicted a rate of 667,000.

There were 463,000 new homes for sale at the end of the month. This represents an 8.4-month supply at the current sales rate, an improvement.

Both the median and average sales price of new houses sold in February were down from January, to $400,500 and $485,000, respectively.

In contrast, existing home sales saw a veritable explosion compared to previous months, rising 9.5% in February. Existing homes tend to be cheaper than new ones, making them more attractive.

The median existing sales price was up 5.7% YOY to $384,500. This is the eighth straight month of annual price gains, but still cheaper than the median for new homes.

Stock shortages have elevated demand for new construction despite higher prices, but more and more homeowners are breaking free of their rate lock-in and opting to sell.

As time passes and homeowners are forced to face the reality of high rates, more existing inventory should emerge.

“Additional housing supply is helping to satisfy market demand,” said NAR Chief Economist Lawrence Yun.

“Housing demand has been on a steady rise due to population and job growth, though the actual timing of purchases will be determined by prevailing mortgage rates and wider inventory choices.”