US New Home Sales Jump to 10 Months High

In January, sales of new single-family houses in the United States hit a 10-year high as prices fell. Nevertheless, a potential slowdown in the housing market recovery is posed by a recent rise in mortgage rates.

On Friday, the Commerce Department reported that the annual rate of sales for newly constructed homes rose to 670,000 units, a rise of 7.2% from the previous month and the highest level since March 2022. (Feb 24). The revised sales rate for December increased from 616,000 units to 625,000 units.

Sales of newly constructed homes are reported when contracts are signed and are seen as an early signal of future housing market activity. In terms of geographic location, sales went through the roof in the South while plummeting in the Midwest, Northeast, and Western regions. New house sales, which represent a relatively little portion of US home sales, were predicted to climb to a pace of 620,000 units.

In January, sales were down 19.4% from the same month a year ago.

The Federal Reserve’s aggressive interest rate rises have had the most negative impact on the housing market. Seven consecutive quarters of declining residential investment is the longest such period since 2009.

There are indicators that the worst of the housing market downturn may be behind us. While optimism among single-family homebuilders reached a five-month high in February, it remained negative despite the January decline in sales of previously owned houses.

Yet a home market recovery is likely still a ways off. Mortgage rates have resumed their ascent after reports of good retail sales and labor market conditions, as well as high monthly inflation readings, which have fueled expectations that the Federal Reserve will hike interest rates later this spring or early summer.

As reported by Freddie Mac, the average rate for a 30-year fixed mortgage rose from the previous week’s average of 6.32 percent to 6.50 percent this week. A three-month high was reached after the third consecutive weekly gain.

In January, the typical price of a brand-new home in the United States was $427,500, down 0.7% from January 2017. Toward the end of January, there were 439,000 brand-new residences available for purchase, down from 452,000 in December.