ales of newly built homes rebounded last month after taking a sharp decline during severe winter weather in January, while the typical sales prices for new single-family homes edged down.
Signed contracts for new single-family homes rose 1.8% last month from January, to a seasonally adjusted annual pace of 676,000, the U.S. Census Bureau reported Tuesday. The February sales figure was up 5.1% from a year earlier.
The median sales price of new houses sold in February was $414,500, down 1.5% from a year ago and a 3% drop from January. Last month’s typical sales price was the lowest for any February since 2022.
The price decline was powered by a surge in sales of newly built homes priced between $300,000 and $400,000, which accounted for 34% of new homes sold in February, the highest share in over a year and 7 percentage points higher than January.
“This is a resumption of a trend that was bucked in January, in which smaller and more affordable new homes make up a sizable portion of inventory and sales,” says Realtor.com® Senior Economist Joel Berner.
The monthly bounce in contract signings was powered by gains in the South and Midwest, where severe winter storms may have suppressed sales in January. New-home sales fell in the West and plunged nearly 50% in the Northeast, which suffered its own winter storms last month.
A slight decline in mortgage rates likely helped power the national rebound in sales, with average rates on 30-year fixed home loans dropping to 6.84% in February, down from 6.96% in January, according to Freddie Mac.
New-home supply at highest since 2007
Despite the national uptick in sales in February, the supply of new homes available for sale is now at its highest level since 2007, with a seasonally adjusted estimate of 500,000 units on the market.
“Overall, the inventory build-up suggests that new home buyers are starting to pull back,” says Bright MLS Chief Economist Lisa Sturtevant. “Right now, new home inventory is rising because there are fewer buyers and homes that were started last year are sitting vacant.”
At the current sales pace, the supply of new homes on the market in February would last for 8.9 months, down from 9 months in January but up from 8.7 months a year ago.
A supply of six months is generally considered balanced between buyers and sellers, putting current inventory levels for new construction into buyer’s territory.
“With months of supply remaining in buyers’ market ranges for new builds, we continue to see more completed homes for sale than ones that haven’t been started yet,” says Berner.
Berner notes that the more leisurely pace of the market allows more buyers to visit their potential new home in its finished state, instead of being forced to purchase a home that is not yet built, as many did during the post-COVID-19 pandemic buying craze of 2021 and 2022.
“As mortgage rates remain stubbornly high and existing home prices continue to climb, prospective homebuyers should seriously consider a new build,” he says. “The market conditions are more favorable to buyers, builders are prioritizing delivering more affordable new inventory, and the cost of ownership for new homes tends to be lower than existing homes.”