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.
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.