Sales of new U.S. homes slipped 0.6 percent in February, a third straight monthly decline. But year to date, sales are up 2.2 percent compared with 2017 in a sign that buyer demand remains solid.
The Commerce Department said March 23 that last month’s sales came in at a seasonally adjusted annual rate of 618,000, down from 622,000 in January and 653,000 in December.
Homebuyers at the start of the spring purchase season are generally finding higher prices and fewer properties available. Those factors, along with rising mortgage rates, have suggested that home ownership is becoming less affordable. The shortage of existing homes on the market is intensifying competition among would-be buyers of newly built houses.
But buyers seem undeterred so far about the lack of available homes, given the low unemployment rate and wave of younger millennials who are entering the real estate market.
“The demand for new homes should continue to rise with a solid job market, modestly accelerating wages and positive demographics,” said David Berson, chief economist for Nationwide Insurance.
Last month’s decline came largely from a 17.6 percent drop-off in new homes sold in the West. New-home sales fell in the Midwest but climbed in the Northeast and South. The median sales price of a new home climbed nearly 10 percent from a year ago to $326,800.
New homes make up slightly more than 10 percent of homes now being sold. Among existing homes, sales rose in February to a seasonally adjusted annual rate of 5.54 million, the National Association of Realtors said the week of March 12. But the supply on the market has been rapidly vanishing. Listings of existing homes have plunged 8.1 percent over the past year.
Rising borrowing costs could worsen the supply squeeze. Many homeowners are reluctant to upgrade to another home that would require them to take on a mortgage with a higher rate than they now pay.
The average rate this week for a 30-year fixed rate mortgage was 4.45 percent, up from an average last year of less than 4 percent, according to mortgage buyer Freddie Mac.