Sales of newly built houses are slipping as affordability concerns and other factors conspire to hurt housing demand.
January new home sales totaled a seasonally adjusted annual rate of 657,000, meaning that many homes would change hands over the next 12 months at this pace. The rate is 10.5% lower than the revised December figure and 1.1% below the same month of 2024, according to a report released Wednesday by the U.S. Census Bureau and the Department of Housing and Urban Development.
Meanwhile, the median sale price of new houses sold in January hit $446,300, the highest since October 2022. Analysts attribute the increase to more high-end homes selling.
The historically underbuilt housing market and builders being able to offer incentives provide some hope, explained Odeta Kushi, deputy chief economist at First American, a title insurance and settlement services firm. Still, she said existing home listings have increased recently, especially in the key Sun Belt markets of Florida and Texas.
"I don’t see much relief for builders in the near term," Kushi said in an email.
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Wednesday's data followed a disappointing report last week on housing starts. The January sales decline is not shocking, considering recent frigid temperatures and the general volatility of new home sales, noted Ryan Sweet, chief U.S. economist at research firm Oxford Economics.
Still, analysts point to falling homebuilder sentiment and a malaise about single-family sales expectations given elevated mortgage rates, rising construction costs and uncertainty surrounding Trump administration policies.
“With shelter inflation still rising at a 4.4% annual clip and a housing shortage of roughly 1.5 million units, the best way to bend the rising housing cost curve is for the Trump administration and Congress to enact policies that will allow builders to construct more attainable, affordable housing,” said Rob Dietz, chief economist of the National Association of Home Builders, in a statement this week.
The NAHB expects a small increase in single-family housing construction this year as builders navigate "conflicting market conditions."
The trade group defines a new home sale as when a buyer signs a contract or a builder accepts a deposit. The home can be in any stage of construction, from not started to complete.