US new home sales dropped 10.5% in January, according to the Commerce Department, as persistently high mortgage rates sidelined potential buyers. The median house price rose 3.7% to $446,300, its highest level since October 2022.
Cold temperatures in much of the country likely contributed to the decline in new home sales, which also reflected a slowdown in retail sales and job growth. Economists expect mortgage rates not to budge much from current levels amid policy uncertainty, making the outlook for the spring home selling season cloudy.
New home sales plunged 10.5% to a seasonally adjusted annual rate of 657,000 units last month, with significant declines in the Northeast and Midwest. The median new house price increased by 3.7%, while the inventory of new homes reached its highest level since December 2007.
Higher mortgage rates have eroded affordability, making it harder for buyers to enter the market. With average 30-year fixed-rate mortgage rates hovering around 6.85%, consumers’ inflation expectations have surged due to concerns about tariffs and their impact on goods prices.
Growth estimates for the first quarter are mostly below a 2% annualized rate, with some economists predicting a significant pullback in new residential construction projects over the next few quarters. The inventory of new homes remains high, making it uncertain whether builders will be reluctant to break ground on new housing projects.
Source: https://www.reuters.com/markets/us/us-new-home-sales-fall-sharply-january-2025-02-26