Sales of new homes unexpectedly fell in January to the lowest level since August as borrowing costs rose and winter weather depressed demand, according to government data released Monday.
Single-family home sales dropped 7.8% month-over-month to a 593,000 annualized pace (the estimate was 647,000) after a 643,000 rate (revised from 625,000). The median sales price increased 2.5% year-over-year to $323,000. The supply of homes at the current sales rate climbed to 6.1 months from 5.5 months; 301,000 new houses were on the market at end of January, the most since March 2009.
The results, which are volatile on a month-to-month basis, showed a 14.2% slump in the South, the largest decrease since March 2015 and a sharp decline in the Northeast. The two areas experienced inclement weather.
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Mortgage costs are picking up and property price appreciation continues to outpace wage growth. That’s crimping affordability, especially for younger Americans and first-time buyers. The average rate on a 30-year mortgage has jumped this month to the highest level since 2014.
Nonetheless, steady hiring and elevated consumer confidence are expected to help underpin housing.
New-home sales, tabulated when contracts get signed, account for about 10% of the market. They’re considered a timelier barometer than purchases of previously owned homes, which are calculated when contracts close and are reported by the National Association of Realtors.
Purchases dropped in the South to a 301,000 annual rate in January, the slowest since December 2016. They fell 33.3% in the Northeast. Sales rose 15.4% in the Midwest and 1% in the West.
The Commerce Department said there was 90% confidence that the change in sales last month ranged from a 26.8% drop to an 11.2% increase, underscoring the volatility of the data. The report was released jointly by the Census Bureau and Department of Housing and Urban Development in Washington.