Sales of new single-family homes in the United States fell unexpectedly in february against a backdrop of rising mortgage rates and home prices, which are reducing affordability for first-time buyers.
New home sales fell 2% to a seasonally adjusted annual rate of 772,000 units last month, falling for the second month in a row, the Department of Commerce.
January’s sales pace was revised down to 788,000 units from 801,000 previously reported. New houses are a leading indicator of the housing market, since they are counted at the signing of the contract.
“Rising mortgage rates and high prices will be key issues and could affect home sales going forward,” said Rubeela Farooqi, chief US economist at High Frequency Economics.
Economists polled by Reuters estimated that new home sales, which make up 11.4% of US home sales, would rebound to a pace of 810,000 units. Sales decreased 6.2% year over year in February. They peaked at 993,000 units in January 2021, the highest level since late 2006. However, they remain above their pre-pandemic level.
The mortgage rates rose in February and have continued to rise after the Federal Reserve raised its interest rate by 25 basis points last week, the first increase in just over three years, and laid out an aggressive plan to bring credit costs to restrictive levels by 2023.
The new home market remains supported by existing home inventories near record lows. Data from last week showed existing home sales fell sharply in February.
The median new home price in February increased 10.7% from a year ago to $400,600. There were 407,000 new homes on the market, the highest level since August 2008 and up from 398,000 units in January.
At the rate of sales in February, it would take 6.3 months to clear the supply of homes on the market, compared to 6.1 months in January.
