Housing market economists are abuzz following the release of January’s new home sales data posted this morning. The report comes as the first data release for new single-family house sales in 2024.
New residential home sales climbed 1.5% month-over-month in January to an annual rate of 661,000. This is actually slightly worse than expectations, as economists were hoping to see 680,000 in new home sales, a more notable improvement from December’s 651,000 reading, which marked an 8% increase from November. The median price of new houses sold in January was $420,700, up about 1.8% from the $413,200 median price in December.
While below projections, today’s report confirms the growing trend of homebuyers slowly inching toward new properties, eschewing the existing homes market. Reasonably so, with mortgage rates still trending around historic highs, many pandemic-era homeowners are opting to hold onto their rock-bottom mortgage as a means of avoiding high interest rates on a new property.
With the supply of new homes for sale vastly outweighing the supply of existing properties, many homebuyers have, in a sense, been forced into the primary market. Indeed, as of January, there is an 8.3-month supply of new houses for sale, far higher than the 3-month supply of existing homes for sale.
That said, existing home sales actually climbed 3.1% in January from December to a seasonally adjusted annual rate of 4 million homes, per the National Association of Realtors. This is still down 1.7% from January last year, however.
New Home Sales Continue to Grow Amid Elevated Mortgage Rates
The housing market has been in a tough spot for the past few years. “Indeed, the Covid-19 pandemic has pushed already accelerating home price growth to shocking new highs, and combined with elevated mortgage rates, ala the Federal Reserve’s rate-hike process, home affordability has sunk to historic lows. Recently, the 30-year mortgage rate returned to 7% for the first time in several months.
The fact is, despite a relative dip in housing demand in the past year and a half or so, the limited supply of available homes for sale has kept prices high, pricing out many would-be homebuyers.
According to the NAR’s Housing Affordability Index, housing affordability came in at 101.9 in December of last year. For context, a reading of 100 means a family making a median income would have exactly enough to afford a median-priced home.
On the date of publication, Shrey Dua did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
