New Home Sales Turn South

After a surprise bump in December, new home sales took a turn last month thanks to persistent unaffordability and winter weather.

New home sales slipped 10.5% on the month to a seasonally adjusted annual rate of 657,000, according to data from the U.S. Census Bureau and the Department of Housing and Urban Development.

Sales fell annually as well, down 1.1% from the January 2024 estimate of 664,000.

The decline took economists, who predicted 680,000 annualized sales, by surprise.

At the end of the month, 495,000 new homes were for sale. At the current rate, this represents a 9-month supply.

The median sales price of new houses sold was $446,300, while the average was $510,000. 

The South experienced the largest decline in a month with record snow in places that rarely see it. Freezing temperatures tend to keep potential buyers at home and stop sellers from listing.

The Midwest and Northeast saw slower sales as well, while the West managed to come out positive.

More for-sale inventory is giving buyers negotiating power back. But persistent house price gains, paired with rates near 7%, are keeping many sidelined.

Existing inventory also moved slowly in January, though sales were up annually, the fourth consecutive YOY gain.

“Mortgage rates have refused to budge for several months despite multiple rounds of short-term interest rate cuts by the Federal Reserve,” said NAR Chief Economist Lawrence Yun. “When combined with elevated home prices, housing affordability remains a major challenge.”