Existing home sales may still be sliding of late, but new home sales are staging a modest rebound to start the year.
The U.S. Department of Housing and Urban Development and the U.S. Census Bureau released their new home sales figures, revealing that January saw a 7.2% monthly uptick to reach a seasonally adjusted annual rate of 670,000 units. January’s pace was the strongest since March 2022, and it builds off December, which saw a substantial upward revision.
With existing home sales still sluggish, new home sales figures imply that builders are seeing some success enticing potential buyers to make the leap with incentives such as discounts and buy-downs on their interest rates.
“The latest [home builder sentiment] survey shows 57% of builders are using incentives to bolster sales, including providing mortgage rate buy-downs, paying points for buyers and offering price reductions,” said Alicia Huey, chairman of the National Association of Home Builders (NAHB). “Buyer incentives, along with stabilizing mortgage rates during the month of January, increased the pace of new home sales for the month.”
The median new home sales price fell for the third straight month, another sign that builder discounts are coaxing buyers into action. After peaking at $496,800 in October, January’s median price was down to $427,500, an 8.2% decline from the prior month. Median prices for newly built homes have now fallen for three consecutive months.
Sales still remain down compared to the historical strength seen during the housing boom of the past two years. Year over year, sales are down 19.4%. Observers will no doubt be intently watching how the new home sales market trends given the recent upward movement in mortgage rates, as well as how builders respond.
“Even though new home sales edged higher in January, the recent uptick in mortgage rates would imply continued weakness in the coming months,” posited Danushka Nanayakkara-Skillington, assistant vice president of forecasting and analysis for the NAHB.
Inventory remained solid, with 7.9 months of supply at the current sales rate.