New Home Sales Drop in January

Summary: Supply Snags Curtail New Home Sales

  • New home sales fell 4.5% to a 801K-unit pace in January. Upward revisions to sales in the final three months of 2021 takes some sting out of the monthly decline.
  • Sales are 19.3% lower than the blazing hot pace experienced during January 2021.
  • The moderation in new home sales over the past year has largely occurred as the result of low inventories and builders throttling back sales amid ongoing shortages of building materials and labor, which have brought on long delays and uncertain completion dates.
  • The number of homes for sale at the end of January improved to 406K. The increase, however, was the result of a 10.1% jump to 106K for homes where construction has not yet started, the highest on record.
  • Supply scarcities are adding to a rising cost environment and are pushing up new home prices. The median sales price of a new home rose 13.4% over the year to $423,300 in January.
  • In January, 91% of the homes sold were priced over $300,000, which mostly reflects the broad-based step-up in prices over the past year. In 2020 and 2021, the share of homes in this same price range averaged 62% and 75%, respectively.
  • The West (1.2%) was the only region to post an increase in sales in January. New homes tend to be priced higher in the region, which likely boosted the median home price during the month.
  • Sales fell in the Northeast (-10.7%), Midwest (-3.7%) and South (-7.4%) during January.
  • The recent pull back in mortgage applications for purchase is a sign that low inventories, rising prices and higher mortgage rates may weigh on housing activity in coming months. For the week ending February 18, the MBA’s Mortgage Application Purchase Index fell 10.1%, the third straight weekly decline.