New home sales step back in February

New home sales retreated for a second-straight month in February, the U.S. Census Bureau and the Department of Housing and Urban Development reported this morning.

Sales of new single-family homes in February 2022 were at a seasonally adjusted annual rate of 772,000, which is 2% below the revised January rate of 788,000.

The latest Monthly New Residential Sales Report is also 6.2% below the February 2021 estimate of 823,000. 

The National Association of Home Builders attributed the monthly sales decline to higher mortgage rates and higher construction costs. Demand remains solid due to a lack of existing home inventory, however.

“The new home market is more important than ever as a source of inventory given the historically low level of resale homes available for purchase,” said NAHB Chairman Jerry Konter. “However, higher construction costs are hindering new home sales as the cost of lumber, OSB, shingles and other materials rise. Policymakers could help by reducing tariffs on materials as an anti-inflation measure.”

The median sales price of new houses sold in February was $400,600, falling 6.3% from the median January price of $427,700.

But the latest figure is nearly 11% higher than the median price of $362,000 in February 2021.

The average sales price in February was $511,000, rising 3.4% above the previous month’s average sales price of $494,000.

Compared to the same month a year ago, prices jumped 25.4% and an average price of $407,500.

The seasonally‐adjusted estimate of new houses for sale at the end of February was 407,000.  This represents a supply of 6.3 months at the current sales rate. 

“New home sales softened in January and February as mortgage rates increased,” said NAHB Chief Economist Robert Dietz. “NAHB is forecasting additional gains in interest rates as monetary policy meaningfully tightens in 2022, putting additional pressure on housing affordability. However, because there is such limited inventory of existing single-family homes on the market, additional new construction is required to meet demand even as building costs significantly outpace inflation.”

Here’s how February new home sales break down by region:

• In the Northeast, sales soared 59.3% compared to the previous month and were up 7.5% compared to February 2021.
• In the Midwest, sales climbed 6.3% compared to January but fell 19.2% compared to February 2021.
• In the South, sales decreased 1.7% in comparison to the prior month and are down 3% from the same period a year ago.
• In the West, sales rose 2.3% for the month and surged ahead 33% from the February 2021 rate.