After plummeting in January, new home sales fell slightly lower in February, however, they still remained slightly above last year’s pace, according to the latest report from the U.S. Census Bureau and the U.S. Department of Housing and Urban Development.
Sales of new single-family homes decreased in February to a seasonally adjusted annual rate of 618,000, the report showed. This is down 0.6% from January’s rate of 622,000 homes, but is still up 0.5% from 615,000 homes in February 2017.
“After a third bad month in a row, the haltingly progressive, two-steps-forward, one-step-back pattern the new home sales market has been in for much of the past year is in danger of reversing itself,” Zillow Senior Economist Aaron Terrazas said. “There’s no doubt that builders are keenly aware of just how much the housing market overall is starving for new housing supply, and of the huge role they play in helping to feed demand.”
“Unfortunately, building conditions right now just aren’t cooperating,” Terrazas said. “Buildable, desirable land is scarce and expensive. Competition for skilled labor is high. And materials costs, in particular, keep rising – made worse by the shifting winds of international trade politics.”
Previously, Freddie Mac forecasted new home sales will drive the housing market in 2018, however so far new home sales seem to have slowed down, rather than push the market forward.
But one expert explained the reason for the slight decrease in February was a strong upward revision to January’s new home sales.
“New home sales slipped in February after January’s data was revised up to be much stronger than first thought,” realtor.com Chief Economist Danielle Hale said. “February sales were down 0.6% from last month but up 0.5% from last year. With the revision to January’s data, the past few months have showed strong national new home sales, driven by the West and South.”
And one expert, who served as Fannie Mae’s chief economist for more than 20 years, explained he still expects new home sales to rise this year. Nationwide Chief Economists David Berson forecasted new home sales will increase 7% in 2018 to 660,000 sales.
The median sales price increased in February to $326,800, up from $323,000 in January. The average sales price came in at $376,700 for the month.
The seasonally adjusted estimate of new homes for sale rose slightly from 301,000 homes in January to 305,000 homes in February. But at the current rate of sales, this fell from a 6.1 month supply to a 5.9 month supply in February.
“The 0.6% m/m drop in new home sales was marginal, but it marks the third month in a row of falling sales,” Capital Economics Property Economist Matthew Pointon said. “However, given the relatively healthy inventory of new homes and reports from homebuilders of strong demand, we doubt the weakness seen over the start of the year will persist.”