Sales activity rises in February – but by less than expected
New-home sales edged higher in February thanks to a slight decrease in mortgage rates and limited inventory, although the increase fell short of what industry experts expected.
Single-family home sales jumped 1.8% to a seasonally adjusted annual rate of 676,000, according to data from the US Department of Housing and Urban Development (HUD) and the US Census Bureau released Tuesday. New home sales increased year-over-year by 5.1%.
Mark Fleming, First American chief economist, noted that while sales increased, it was by a smaller margin than hoped.
“New-home sales are improving, but well below what’s needed,” Fleming said. “[The rate was] slightly below the consensus estimate, which was predicated on the fact that mortgage rates were declining in February, typically a boost to new-home sales.”
Fleming said that because of the ever-growing demand for housing, an increase of 676,000 homes in 2025 is not the same as it would have been 30 years ago due to the increase in demand.
“If new-home sales were tracking at the long-run average percentage of total households, then the pace of new-home sales would be almost 950,000,” he said.
New single-family home inventory rose to 500,000, a 7.5% increase compared to February 2024. That marks a supply of 8.9 months at the current building pace.
Meanwhile, the number of ready-to-occupy homes also increased year-over-year by 35% to 119,000, the highest amount of those home types on the market since the middle of 2009.
The median home sales price decreased compared to February 2024 by 1.5% to $414,500.
House sales decreased in all regions except for the South, which saw a year-over-year bump of 12.4%. All other regions decreased, including 6.7% in the West, 13.5% in the Midwest, and 50.8% in the Northeast.
In addition to the challenges posed by limited housing inventory and higher interest rates, external forces are limiting the ability to increase new house inventory.
Possible increases in material costs caused by potential tariffs make it difficult for additional new homes to be built, according to Fleming.
“(Builders) still face supply-side challenges making it difficult to scale up construction to just keep up with growing shelter demand, let alone reduce the overall housing stock supply debt,” Fleming said.
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