In January, new-home sales fell more than anticipated, as government data revealed a rise in median prices both monthly and annually. According to the Census Bureau and the Department of Housing and Urban Development, single-family home sales dropped 10.5% month-on-month, adjusting to an annual rate of 657,000 units.
This marks a significant decline from the upwardly revised figure of 734,000 units recorded in December. Analysts had predicted sales to land at around 680,000, suggesting a modest 2.6% decline when compared to unrevised figures published earlier, as highlighted by a survey conducted by Bloomberg. Ryan Sweet, chief US economist at Oxford Economics, commented on the figures, stating that January’s drop in new-home sales aligns with projected trends and effectively reverses some of the sales gains observed in the preceding two months.
It's important to note that sales of new homes are notoriously volatile and frequently undergo substantial revisions. Additionally, January's colder-than-normal weather likely contributed to lower sales figures, particularly in the Southern region. The data pointed out that sales significantly declined across the Northeast, Midwest, and South, although the West experienced a 7.7% increase in new-home sales.
Overall, the consolidated new-home sales saw a slight year-over-year decrease of 1.1%. The median price of new houses sold saw an uptick last month, rising to $446,300 from December's $415,000 and January 2024's $430,400. This increase in prices raises concerns about the sustainability of buyer confidence and market health.
Sweet further elaborated on the risks associated with new-home sales and the broader residential investment landscape for 2024. He expressed that challenges such as persistently high mortgage rates, potential tariffs on imported construction materials from Canada and Mexico, and labor supply concerns resulting from the previous administration's immigration policies could weigh heavily on market performance this year.
On a more positive note, inventory levels are not currently a pressing concern. The supply of new homes increased to a 9-month supply based on the sales rate in January, up from the previous 8-month supply noted in December, according to data from the Census Bureau and HUD. Adding to the overall sentiment, recent data released by the National Association of Home Builders and Wells Fargo indicated that builder confidence in the US has dipped more than expected, hitting the lowest point in five months due to ongoing tariff uncertainties and rising housing costs..