February New Home Sales Rise, But Revisions Put Damper on Report
New home sales improved in February, HUD and the Census Bureau reported Thursday, the third straight monthly increase, but only because of downward revisions to previous months.
The report said sales of new single‐family houses in February rose to a seasonally adjusted annual rate of 640,000, 1.1 percent higher than the revised January rate of 633,000, but fell by 19.0 percent from a year ago (790,000).
Regionally, sales were mixed. In the largest region, the South, sales rose by 3 percent in February to 415,000 units, seasonally annually adjusted, from a revised 403,000 units in January but fell by nearly 9 percent from a year ago. In the West, sales improved by 8.1 percent to 133,000 units in February from a revised 123,000 units in January but fell by 33.2 percent from a year ago.
In the Midwest, sales fell by 1.4 percent in February to 71,000 units, seasonally annually adjusted, from a revised 72,000 units in January and fell by 20.2 percent from a year ago. In the Northeast, sales dropped by 40 percent to just 21,000 units in February from a revised 35,000 units in January and fell by 55.3 percent from a year ago
The median sales price of new houses sold in February 2023 rose to $438,200. The average sales price rose to $498,700. The seasonally adjusted estimate of new houses for sale at the end of February fell to 436,000, representing a supply of 8.2 months at the current sales rate.
“With the revisions considered, February marked the third consecutive month of growth,” said Charlie Dougherty, Economist with Wells Fargo Economics, Charlotte, N.C. “Builders continue to attract affordability crunched buyers off the sidelines with price discounts, rate buy-downs and other incentives.”
Dougherty said despite the improvement, new home sales remained depressed. “For historical context, the long-term average for months’ supply is about six months,” he said. “The trend improvement in new home sales is an encouraging sign that incentive programs meant to lower inventories and bridge the affordability gap for buyers are working. But, higher sales are unlikely to translate to a meaningful improvement in new single-family construction until inventories move lower from their still-elevated levels.”
“New-home sales have picked up in recent months alongside lower rates and as builders continue to offer incentives,” said Odeta Kushi, Deputy Chief Economist with First American Financial Corp., Santa Ana, Calif. “However, mortgage rates ticked up at the end of February, which may imply some weakness in upcoming home sales data. Nevertheless, when existing homes for sale are nearly non-existent, a new home at the right price may be an attractive option for potential home buyers.”