Key Highlights
- New home sales drop -18.2% in February
- Demand for new homes still strong
New Home Sales Show Largest Decline m/m since 2013
New home sales experienced a near decade high in January and then plummeted -18.2% in February. That monthly tumble was the sharpest m/m drop in new home sales since 2013, according to estimates by both the Department of Housing and Urban Development (HUD) and the US Census Bureau.
Continuing Demand Pushed New Home Sales +8.2% Higher than One Year Ago
Despite this -18.2% drop in new home sales, homebuyers still bought them. On a year-to-year basis, new home sales increased +6% in the Northeast, +24.7% in the Midwest and +23.2% in the South. Overall, new home sales jumped +8.2%.
The West was the only region in the country where new home sales decreased -9.3% year-over-year.
Multiple Reasons for Tumbling New Home Sales
Economists offered several reasons for February’s tumble in new home sales. Included among those reasons were
- Harsh weather conditions
- Rising home prices
- Uptick in mortgage rates
- Limited inventory
- Mounting building costs
Homebuilder Optimism Taking a Hit due to Surging Material Cost
According to Chuck Fowke, chairman of the National Association of Home Builder (NAHB), “(Material shortages) are forcing builders and buyers to grapple with rising affordability issues, as soaring lumber prices have added more than $24,000 to the price of a new home.”
Soaring lumber prices translate into an increase of +59% y/y, the largest annual jump in lumber prices since the 1940’s.
Mathew Speakman, Zillow economist, said, “Spirits among builders remain high, and activity should remain strong in the months to come, but (homebuilder) sentiment has fallen back from the record highs set a few months ago.” Speakman pointed specifically to volatile increases in material prices.
Will Down Shift in New Home Sales Last?
According to Doug Duncan, chief economist with Fannie Mae, the answer isno. With the most recent data from the National Association of REALTORS® (NAR) on February’s existing home sales showing weakness due to a scant two months supply of existing homes, Duncan believes buyers will gravitate to new homes with its more than double 4.8 months of supply.
Duncan said, “The (lagging) new sales number continued the pattern of weak February housing data…we expect the drop-off to be temporary, with sales of new homes rebounding strongly in March.”
Latest Median Prices
The median sales price of a new home was $349,400, an increase of +5.3% posted last year. The average sales price of a new home came in at $416,000.
Thanks to Department of Housing and Urban Development, US Census Bureau, National Association of Home Builders, Fannie Mae, Zillow and HousingWire.
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