NAHB: New Home Sales Remained Relatively Unchanged in February 2023

Increased mortgage rates and home prices, as well as higher building expenses, all led to a drop in new home sales in February, but trends indicate that this will rebound later in the year.

According to freshly released data from the U.S. Department of Housing and Urban Development and the U.S. Census Bureau, sales of newly built single-family houses increased 1.1% in February to a seasonally adjusted annual rate of 640,000 from a downwardly revised estimate in January.

Yet, new home sales are down 19% year on year.

“Builders continue to face challenges in terms of higher interest rates, elevated construction costs and access to critical materials like electrical transformers,” Alicia Huey, head of the National Association of Home Builders (NAHB) and a Birmingham, Alabama-based custom home builder and developer, stated.

“Nonetheless, the lack of existing home inventory means demand for new homes will rise as interest rates decline over the coming quarters.”

“The February new home sales data points to an increase for the monthly pace of single-family construction starts later in 2023 given a rise in builder sentiment and an increase for sales of homes not yet started construction,” NAHB Chief Economist Robert Dietz added.

“However, concerns remain about the tightening of credit conditions for acquisition, development and construction loans for smaller builders due to recent stress for the banking system.”

When a sales contract is signed or a deposit is accepted, a new home is sold.

The house can be in any stage of construction: unfinished, under construction, or finished.

In addition to compensating for seasonal impacts, the February value of 640,000 units represents the number of homes that would sell if the current pace was maintained for the following year.

For the fifth month in a row, new single-family home inventories have decreased. At the current building rate, the February figure suggested an 8.2-month supply.

A measure that is close to a six-month supply is deemed balanced. Nonetheless, inventories of single-family resale homes are at a low of 2.5 months.

The typical new home sale price increased 2.5% year on year in February to $438,200.

Home prices have risen as a result of rising construction expenses.

A year ago, about 15% of new home sales were priced under $300,000, but that figure has already dropped to 10% of all homes sold.

Year to date, new house sales declined in all regions, with the Northeast down 29.2%, the Midwest down 21.3%, the South down 7.3%, and the West down 40.6%.