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First Cut: Strong sales of new single-family homes in February probably won’t last into March

Sales of new single-family homes dipped 4.4% to 765,000 in February after a near-term peak of 800,000 in January which was the highest since 842,000 in May 2007. Very low mortgage rates helped keep consumers in the housing market in February, although there was the first hint of what is likely to be a swift and steep slowdown in March.  Nonetheless, sales were up 14.3% compared to the year-ago month.

Builders have been active in starting projects over the winter months, which in part accounts for the uptick in the months’ supply of homes to 5.0 in February from 4.8 in January. However, the overall supply of homes remains narrow. This is also helping to drive prices upward. The median price of a single-family home was up 6.3% in February from January to $345,900.

Consumers were snapping up units not yet started and under construction due to limited supplies of homes – existing and new – and in an effort to latch on to mortgage while the 30-year fixed rate was near record bottoms. Nearly 2/3 of units sold were not complete.

Sales were mixed across regions. It should be noted that the 7.3% decline in the Midwest and 17.2% fall in the West were after unusually strong sales in the prior month. The Northeast had a 38.9% jump in sales while sales in the South were a steadier up 1.0%. Some of this is working against normal seasonal patterns as consumer were more actively seeking to buy a home in the winter months to take advantage of low rates and before prices went up further.

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