New home sales in the U.S. decline in January amidst rising prices.

• In January, the sales of new U.S. single-family homes decreased slightly more than anticipated, possibly due to the increase in mortgage rates and prices, which may have deterred some first-time buyers from purchasing.
• The Commerce Department announced on Thursday that new home sales decreased by 4.5% to a seasonally adjusted annual rate of 801,000 units in the previous month.
• The previously reported sales pace for December was revised upward to 839,000 units from 811,000 units.

In January, the sales of new U.S. single-family homes decreased slightly more than anticipated, possibly due to the increase in mortgage rates and prices, which may have deterred some first-time buyers from purchasing.

The Commerce Department reported that new home sales fell 4.5% to a seasonally adjusted annual rate of 801,000 units in December, while the sales pace was revised higher to 839,000 units from the previously reported 811,000 units.

New home sales in the West increased, while they decreased in the Midwest, Northeast, and densely populated South. Economists polled by Reuters had predicted a fall in new home sales, which account for more than 10% of U.S. home sales, to a rate of 806,000 units.

In January 2021, sales plummeted 19.3% compared to the previous year, reaching a peak of 993,000 units. This was the highest rate since the end of 2006. Currently, mortgage rates are at their highest point in nearly three years.

Despite an increase in mortgage rates, the demand for housing is predicted to remain robust due to a record-low inventory of previously owned homes. This, coupled with high prices, will exacerbate affordability issues, particularly for first-time buyers.

In January, the median price of new houses increased by 13.4% from the previous year to $423,300. The number of new homes on the market also increased by 7,000 units to 406,000.

Builders are facing challenges with shortages and higher prices for inputs like softwood lumber for framing, as well as cabinets, garage doors, countertops, and appliances, resulting in a backlog of homes approved for construction but yet to be started.

The time required to clear the supply of houses on the market increased from 5.6 months in December to 6.1 months in January.