New home sales jump in January

Summary

New Home Sales Start the Year with an Upswing

• New home sales leaped 7.2% in January to a 670K annual rate, the strongest pace since March 2022.
• January's upside surprise follows a significant upward revision for December. The recent strength stands in sharp contrast to ongoing weakness in existing home sales, which suggests that builders have been successful using rate buy-downs and price discounts to sell homes in the challenging affordability environment.
• A 17.1% surge in sales in the South drove January's rise. New home sales declined in all other regions, slipping 7.3% in the West, 6.9% in the Midwest and 19.4% in the Northeast.
• Sales of homes that have not yet been started shot up 72% over the month. By contrast, sales of completed homes and of homes under construction fell by 9.1% and 1.1% in December, respectively.
• In additions to rate buy-downs, builders are lowering prices to clear inventory. The not-seasonally adjusted median sales price fell by $38,100 to $427,500 over the month. The median sale price in January dipped 0.7% below its January 2022 level, marking the first reading of year-over-year median price declines since August 2020.
• The number of new homes for sale fell for the third consecutive month, dropping 2.9% to 439K.
• The decline in inventories produced a notable drop in months supply, which fell from 8.7 months in December to 7.9 months in January. This supply of new homes at the current sales pace remained above the 5.7 months supply registered in January 2022.
• Homes priced above $500K made up one third of all new homes sold, a notable step down from the 43% composition in December. More affordable homes in the $300K to $499K price range made up 53% of all sales, up from 46% the month prior.

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