Real Estate

Strong new-home sales reflect still-strong demand

New-home sales reached a seasonally adjusted annual rate of 661,000 in January, 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 1.5% increase from the revised December rate of 651,000, it falls slightly below market expectations. It also marked a 1.8% rise from the January 2023 pace of 649,000 units sold.

The uptick in new-home sales underscores the persistent strength of demand in the housing market despite the challenges posed by winter weather. Mortgage rates rose last week to their highest level since mid-December, but homebuilders continue to  navigate this landscape by offering interest rate buydowns and other concessions to buyers.

Builder confidence, as measured by a survey from the National Association of Home Builders (NAHB), improved to a reading of 48 in February. Additionally, mortgage applications for new homes surged in January as a lack of existing homes for sale continued to fuel the demand for new construction.

At the end of January, there were 456,000 new homes available for sale, marking a 3.9% year-over-year increase. New homes constitute slightly more than 30% of the total active inventory in the market. At the current sales pace, there is an 8.3-month supply of new single-family homes, according to census and HUD data. 

The median sale price for a new home rose to $420,700 in January, marking a 1.8% increase from December but a 2.6% decrease compared to a year earlier. New home prices have declined for five months in a row on a yearly basis. 

Nevertheless, new construction continues to command a premium over existing homes, with January’s median price for a new home standing 11% higher than that of an existing home.

Against the backdrop of these market dynamics, housing affordability and accessibility have emerged as central themes in state governance. 

More than 20 state governors spoke about housing affordability and accessibility issues with their legislatures during their annual state of the state speeches in an attempt to encourage growth and development, according to a report from The Washington Post. 

The U.S. faces a significant housing shortage, with estimates ranging from 1.7 million to 7.3 million homes, depending on the source, the Post reported. Many  governors have called not only for more spending but also for fewer regulatory barriers to new private-sector construction.

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