Developers cut prices in March after sales slip
New home sales in the US unexpectedly declined in February, a setback in the housing market’s uneven recovery, according to government data.
Purchases of new single-family homes fell 0.3% to a 662,000 annual pace, missing economists’ projections of 677,000. This marks the first drop in three months, according to the Census Bureau report.
Mortgage rates, a key factor in housing affordability, rose slightly in February. Freddie Mac data showed that long-term rates averaged 6.78% in February, up from 6.64% in January. Builders are attempting to boost affordability with incentives and a focus on more modestly priced homes.
“Mortgage rates rose in February, and the elevated rates took a bite out of new home sales,” said Holden Lewis, home expert at NerdWallet. “They declined slightly from the previous month, although sales were 6% stronger than 12 months earlier. Builders are competing with home resales by constructing new homes for buyers on a limited budget.”
Price and inventory trends
Robert Dietz, chief economist of the National Association of Home Builders, noted that NAHB’s latest builder survey found that roughly one-quarter of builders also reported cutting home prices in March.
“The price cuts, in combination with building slightly smaller homes, can be seen in today’s data that show a 7.6% year-over-year decline for median new home prices,” Dietz said.
Read next: Housing market slowdown hits sellers
The median sales price of a new house decreased by 7.6% year over year to $400,500. Meanwhile, the supply of new homes available for sale rose to 463,000 – the highest level since October 2022.
Industry outlook
While new home inventory remains above a balanced level, the limited supply of existing homes for sale (2.9 months’ worth) continues to be a challenge for realtors. However, recent data showing a surge in existing home sales could signal a revival in the resale market.
“Surveys show increased levels of confidence driven by the ongoing lean levels of existing home inventory,” NAHB chairman Carl Harris said. “As interest rates subside over the course of 2024, additional home buyers will be priced into the market, and new construction will be needed to meet this demand.”
Stay updated with the freshest mortgage news. Get exclusive interviews, breaking news, and industry events in your inbox, and always be the first to know by subscribing to our FREE daily newsletter.
