February New Home Sales Meet Expectations, Pre-Coronavirus

The spring home-buying season was off to a good start. New home sales jumped in January, thanks to a mild winter, near-record low interest rates and a welcome pickup in new home construction.

February new home sales dipped a bit, HUD and the Census Bureau reported yesterday. Sales of new single-family houses came in at a seasonally adjusted annual rate of 765,000, down by 4.4 percent from the revised January rate of 800,000, but 14.3 percent higher than a year ago (669,000).

Regionally, results were mixed. The largest region, the South, saw a 1 percent increase in February sales, seasonally annually adjusted, to 404,000 units from 400,000 in January and improved by 6.3 percent from a year ago. In the Northeast, buoyed by mild weather, sales jumped by nearly 39 percent in February to 50,000 units from 36,000 in January and improved by 47.1 percent from a year ago.

In the West, however, sales plunged by 17.2 percent to 222,000 units in February, seasonally annually adjusted, from 268,000 units in January but improved by nearly 25 percent from a year ago. In the Midwest, sales fell by 7.3 percent to 89,000 units in February from 96,000 units in January but improved by 15.6 percent from a year ago.

All of this, however, seems like ancient history in the Age of the Coronavirus. Mark Vitner, Senior Economist with Wells Fargo Securities, noted the February sales pace still exceeded market expectations.

“Sales were incredibly strong before economic activity ground to a halt,” Vitner said. “Sales have averaged a 763,000-unit pace over the past three months, marking the strongest pace since November 2006.”

The report said the median sales price of new houses sold in February rose to $345,900. The average sales price rose to $403,800. The seasonally adjusted estimate of new houses for sale at the end of February fell to 319,000, representing a supply of 5.0 months at the current sales rate.

“Inventories of new homes remain exceptionally lean, particularly for completed homes,” Vitner said. “Persistently low inventories, particularly of completed homes, are one reason we believe any downturn in the home building industry will be relatively short.”

In a separate report yesterday, February home sales increased, said RE/MAX, Denver.

The company’s monthly National Housing Report noted February continued the streak of increased home sales despite very low inventories. Of course, February represented the last full month before the coronavirus became a global pandemic striking the U.S. on a large scale.

“Even as we all adjust to the new landscape of social distancing and limited in-person interaction, houses will continue to be bought and sold,” said Adam Contos, CEO of RE/MAX Holdings Inc. “Overall, demand in February was high, inventory remains low and interest rates are attractive, but exact circumstances vary by community.”

Key takeaways from the report:

–February home sales rose by 7.5% year-over-year, continuing a three-month streak of year-over-year increases. Sales rose by 13.5% and 10.5% in December and January, respectively, RE/MAX said. Sales were strongest in western states.

–Sales prices in February continued to rise. February’s median sales price of $260,000 represented a year-over-year increase of 7.9%, the 14th consecutive monthly increase. Fifteen of the 53 metros surveyed by RE/MAX saw double-digit year over year increases, led by Birmingham, Ala. At 16.5%. Three metros saw decreases.

–Inventory in February remained low, with the number of homes for sale in February down  by 2.6% from January and down 15.8% from a year ago.