New home sales in February were at a seasonally adjusted annual rate of 772,000, down 2.0% compared with January and down 6.2% compared with February 2021, according to estimates from the U.S. Census Bureau and the Department of Housing and Urban Development.
Lack of inventory, rising home prices and rising mortgage rates combined to slow new home sales – but demand remains strong for now.
The median sales price of new home sold in February 2022 was $400,600. The average sales price was $511,000.
As of the end of February, there were about 407,000 new homes available for sale in the U.S. – about a 6.3 month supply at the current sales rate.
“Builders continue to face delays from supply chain bottlenecks,” says Odeta Kushi, deputy chief economist for First American, in a statement. “By stage of construction, the share of completed homes sold was 26.4 percent, up from 24.8 percent one year ago, but still low compared with pre-pandemic levels. The share of homes under construction sold increased from 41.8 percent to 46.5 percent.”
In addition to lack of inventory, rising home prices and rising mortgage rates played a role in February’s dip.
“Affordability is a growing challenge as higher new-home prices and rising rates may be pricing out some buyers,” Kushi says. “One year ago, 31 percent of new home sales were priced below $300,000. In February 2022, only 18 percent of new home sales were priced below $300,000.”
For now, demand remains strong, despite rising rates and home prices.
“The outlook for new-home sales is dependent on the amount of new homes under construction and the demand for new homes,” Kushi says. “We need builders to build more homes simply because there remains a severe supply-demand imbalance in the housing market, driving up prices.
“But builders face supply-side headwinds that make it difficult and more costly to build,” she adds. “These costs are passed onto the buyer in the form of higher prices. In a rising rate environment, that makes affordability a big challenge for potential buyers.”
Photo: Todd Kent