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New home sales rose 7.2% in January from December


New home sales rose 7.2 percent in January from the previous month, thanks to a combination of falling mortgage rates and home prices, along with a willingness by builders to offer sales incentives.

Key findings

  • New home sales rose 7.2% in January to 670,000.
  • Sales are still down almost 20% from the previous year.
  • Homebuilder confidence rose as new home sales rose, gaining 7 points in February.

Sales totaled 670,000 in January, according to data released by the Department of Housing and Urban Development and the Census Bureau. While the increase was a sign of life for new home sales after a slow year, they were still down 19.4% from the same month a year earlier.

Sales incentives were offered by 57 percent of homebuilders, including mortgage interest buyouts and price reductions, according to Alicia Huey, board chairwoman of the National Association of Home Builders.

“Incentives for buyers, along with the stabilization of mortgage rates in January, increased the pace of new home sales for the month,” Huey said. “However, in a sign of ongoing market weakness, sales were down 19.4% from a year ago.”

Rising mortgage rates are still a cause for concern, according to NAHB.

“Although new home sales rose in January, the recent rise in mortgage rates would point to continued weakness in the coming months,” said Danushka Nanayakkara-Skillington, NAHB’s assistant vice president for forecasting and analysis. “In terms of affordability, the median price is down for the third month in a row and is down from a year ago.”

The median sales price for new single-family homes was $427,000, down 8.2% from December. By region, sales numbers fell 19.4% in the Northeast, matching the overall decline; 6.9% in the Midwest; and 7.3% in the West. The South was the only region where sales rose, jumping 17.1%.

At the end of January, 439,000 new homes were still for sale, according to HUD and Census data. The inventory of completed, move-in-ready single-family homes rose 115% from a year earlier to 73,000 homes in January, although this type of inventory represented only 17% of the total inventory.

As sales pick up, homebuilders are more confident about the market, according to the NAHB/Wells Fargo Housing Index. Homebuilders’ confidence in the single-family housing market rose 7 points in February to 42, the highest level since September. Although new home sales make up only about 10 percent of the market, it’s an important piece of the puzzle because the U.S. has a housing shortage of more than 5 million homes, according to the National Association of Realtors.

Sales of existing homes fell in January for a 12th straight month to their lowest level since October 2010. Economists had predicted the number would rise rather than continue to fall. Homeowners are reluctant to sell because they would have to borrow at a higher mortgage rate to buy another home.

Joanna Swanson

Joanna Swanson is Europe correspondent at the Thomson Reuters Foundation based in Brussels covering politics, culture, business, climate change, society, economies and inclusive tech. With specific focus in breaking news, she has covered some of the world's most significant stories.