Washington, D.C. (CNN) New home sales surged in February, rising for a third straight month as mortgage rates fell from their highs of the past year and buyers looked to new construction amid an all-time low stock of existing homes for sale.
Sales of new construction homes rose 1.1% in February from January, but fell 19% from a year ago, according to a joint report from the U.S. Department of Housing and Urban Development and the U.S. Census Bureau. February’s month-on-month gains are further evidence that the housing market may be stabilizing.
Sales of new single-family homes were seasonally adjusted at 640,000 year-over-year, compared to the revised 633,000 in January. Sales fell from last year’s estimated 790,000. It was the strongest sales pace since August.
Mortgage rates fell further in February from the 2022 high of more than 7% reached late last year. At the end of February, however, they started to rise again due to continued inflation. The average mortgage interest rate for a loan with a fixed-rate term of 30 years rose by half a percentage point in February.
With some setbacks for buyers, the prices of new homes rose from January. The median price for a new home rose to $438,200 in February from $427,500 the previous month.
At the end of February, the seasonally adjusted estimate of the number of new homes for sale stood at 436,000. This is a supply of 8.2 months at the current selling price.
“Existing housing stock is very low in many markets, which has made new home sales less competitive,” says Kelly Mangold of RCLCO Real Estate Consulting
When data is released for March, it will be interesting to see whether the cloud of economic uncertainty recently created by bank failures will falter buyers, Mangold said, or if it will dissipate as traditional spring buyers come out with bigger budgets . in full force.
Demographic drivers continue to push strongly for demand for more new home sales, she said.
“Millennials experienced a baby boom in the latter part of the pandemic that was especially pronounced among college-educated women as the rise of remote/hybrid work made juggling the demands of family and work more feasible,” said Mangold. “With this, demographic drivers continue to push high-income households into a stage of life where they may want to grow, and the market appears to be responding.”
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