January’s freezing temperatures typically keep homebuyers away from sales centers and construction sites, but this year’s ultra-low mortgage rates were enough to coax them out of hibernation.
Nationwide sales of new single-family homes increased 4.3 percent from December’s revised rate, totaling 923,000 annualized units, according to the latest report from the US Census Bureau. Last month’s performance marked a 19.3 percent improvement over January 2020, when there were an estimated 774,000 new home sales. It was also the fastest pace recorded since October.
Sales surged 12.6 percent month-to-month in the Midwest, followed by the West at 6.8 percent and the South at 3.0 percent. The Northeast experienced a 13.9 percent decline in closed transactions.
“We believe near historically low mortgage rates and the extremely tight inventory of existing homes for sale have shifted demand into the new home market,” said Doug Duncan, Chief Economist at Fannie Mae.
The median price of a new construction home was $346,400, down 2.7 percent from the previous month, but up 5.2 percent year-over-year. Inventory remained tight, with 307,000 new homes hitting the market in January, representing four months of supply at the current rate of sales. In a balanced market, supply typically ranges from five to six months.
High demand continues to bolster pre-construction sales, which accounted for 30.8 percent of all new homes sold in January, an increase of over four percentage points. “While housing demand clearly remains strong, we believe these supply constraints combined with interest rates beginning to rise will likely exert some downward pressure on home sales over the coming months,” added Duncan.
New home sales are expected to take a hit in next month’s report from the Census Bureau, owing to the severe cold snap that affected the central United States in early February. Texas, which endured widespread power outages, leads the country in new home construction, having built more than 1.6 million new housing units since 2010.