U.S. New-Home Sales Fall to Nine-Month Low Following Bad Weather
(Bloomberg) -- U.S. sales of new homes declined in February to a nine-month low as severe winter weather in parts of the country limited foot traffic against a backdrop of elevated prices that may be restraining momentum.
Purchases of new single-family homes decreased 18.2% -- the sharpest decline since July 2013 -- to a 775,000 annualized pace from an upwardly revised 948,000 rate in the prior month, government data showed Tuesday. The median forecast called for an 870,000 pace. Sales dropped in all regions across the U.S.
In February, inclement weather impeded the search for homes as temperatures dropped below freezing in some parts of the country and power disruptions hit states including Texas. Housing demand is also being restrained by a limited number of available properties that offer interested buyers fewer choices at the same time prices remain elevated.
The report showed the number of properties sold for which construction hadn’t yet started fell to 211,000, the lowest since October 2018. The winter storms probably slowed construction.
Still, the pace of new home sales remains 8.2% on a seasonally adjusted basis above the same month last year, pointing to the housing market’s strength through the pandemic.
“A combination of rising interest rates, Covid fears and tighter lending standards is depressing demand,” Ian Shepherdson, chief economist at Pantheon Macroeconomics, said in a note. “We still hope for a summer revival, but right now the market is struggling.”
In the coming months, higher borrowing costs could put more pressure on affordability and keep some buyers out of the market. Mortgage rates have been slowly rising since mid-February as the U.S. economic outlook improves. The median sales price rose 5.3% from a year earlier to $349,400, according to Tuesday’s report.
Assuming the 30-year mortgage rate remains below 4%, however, damage to affordability won’t halt momentum this year, according to an analysis from Bloomberg Economics.
At the current sales pace, it would take 4.8 months to exhaust the supply of new homes, compared with 3.8 months in January.
A separate report Monday showed that sales of previously-owned homes dropped by more than expected, reflecting a record annual decline in the number of available properties that’s driving up prices and impeding buyers.
- Across regions, sales in the Midwest decreased 37.5%, the biggest drop in 27 years
- Sales in the South fell 14.7%, the most in almost six years; the West showed a 16.4% drop
- New-home purchases account for about 10% of the market and are calculated when contracts are signed. They are considered a timelier barometer than purchases of previously-owned homes, which are calculated when contracts close. The figures tend to be volatile
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