New-home sales receded slightly in February but continued to track above last year’s pace, reaching a seasonally adjusted annual rate of 662,000 last month, according to data published Monday by the U.S. Census Bureau and the U.S. Department of Housing and Urban Development (HUD).
While this figure represents a 0.3% decrease from the revised January rate of 664,000 sales, it also marks a 5.9% rise from the February 2023 pace of 625,000 units sold.
Builder confidence, as measured by a survey from the National Association of Home Builders (NAHB), improved to a reading of 51 in March, its highest level since July 2023. Additionally, mortgage applications for new homes surged in February as a lack of existing homes for sale continued to fuel the demand for new construction.
But a slight uptick in mortgage rates held back the pace of new home sales in February, according to NAHB chief economist Robert Dietz. In February, mortgage rates averaged 6.78%, up from 6.64% in January, according to Freddie Mac data. Rates for 30-year conforming loans at HousingWire’s Mortgage Rates Center stood at 7.15% on Monday.
At the end of January, there were 463,000 new homes available for sale, as new construction continues to account for an outsized share of the housing inventory. At the current sales pace, there is an 8.4-month supply of new single-family homes, according to census and HUD data.
Affordability remains a challenge in the housing market, particularly for first-time homebuyers. In that context, homebuilders have more options to attract buyers. For instance, they can offer to pay down points on a buyer’s mortgage or they can offer builder financing at below-market rates.
The median sale price for a new home kept falling in February to $400,500, down 7.6% from a year ago. Half of new homes sold in February cost less than $400,000, according to Holden Lewis, home expert at NerdWallet.
“We’ve seen more builders bring smaller, less expensive homes to the market in recent months,” Bright MLS chief economist Lisa Sturtevant said in a statement.
Meanwhile, the inventory of existing homes is loosening up. For the week ending March 15, there were 507,000 single-family homes on the market in the U.S., up 1.3% from a week prior, and up 22% from a year ago, according to data by Altos Research.
