New home sales rose in February, climbing for the third month in a row as mortgage rates eased off their highs of the past year and buyers looked to new construction amid historically low inventory of existing homes for sale.
Sales of newly constructed homes were up 1.1% in February from January, but fell 19% from a year ago, according to a joint report from the US Department of Housing and Urban Development and the US Census Bureau. February’s month-over-month gain is further evidence that the housing market may be stabilizing.
Sales of new single‐family houses were at a seasonally adjusted annual rate of 640,000, up from a revised 633,000 in January. Sales were down from last year’s estimated rate of 790,000. It was the strongest sales pace since August.
Mortgage rates in February continued to ease off their 2022 high of over 7% reached at the end of last year. However, they began to climb again at the end of February on concerns of still stubborn inflation. The average mortgage rate for a 30-year fixed-rate loan climbed half a percentage point in February.
In a bit of a setback for buyers, prices of new homes rose from January. The median price for a new home rose to $438,200 in February, up from $427,500 the previous month.
At the end of February the seasonally adjusted estimate of new houses for sale was 436,000. This is a supply of 8.2 months at the current sales rate.
“Existing home inventory has been very low in many markets, which has given new home sales less competition,” said Kelly Mangold of RCLCO Real Estate Consulting
When the data for March is released, it will be interesting to see if the cloud of economic uncertainty most recently caused by bank failures will cause buyers to falter, Mangold said, or if it will dissipate as the traditional spring buyers with larger budgets come out in full force.
Demographic drivers continue to be strong in pushing for a demand for more new home sales, she said.
“Millennials experienced a baby boom in the later portion of the pandemic that was especially pronounced in college-educated women, because the rise of remote/hybrid work made juggling the demands of family and work more attainable,” Mangold said. “With this, demographic drivers continue to push high-earning households into a life stage where they may be looking to upsize, and the market appears to be reacting.”