New home sales rose in January after brief dip in mortgage rates

by Adam Barnes - 02/24/23 11:31 AM ET

FILE – A sign is displayed outside a home in Wheeling, Ill., May 5, 2022. Average long-term U.S. mortgage rates climbed over 6% this week for the first time since the housing crash of 2008, threatening to sideline even more homebuyers from a rapidly cooling housing market. Mortgage buyer Freddie Mac reported Thursday, Sept. 15, 2022 that the 30-year rate rose to 6.02% from 5.89% last week. (AP Photo/Nam Y. Huh)

New home sales rose to their highest level in nearly 10 months in January led partly by builder incentives and softer mortgage rates.

Sales of new single-family homes increased by 7.2 percent last month to a seasonally adjusted annual rate of 670,000, according to Census Bureau data released on Friday. Yet the number is well below the revised estimate from the same month a year ago when it stood at 831,000.

“Many home builders are offering incentives to buyers, sweetening the deal just enough to bump sales from the month prior,” Zillow senior economist Nicole Bachaud said in a statement.

“Mortgage rates ticked down across January opening the door to some buyers who had been shut out by affordability constraints,” she added.

Even so, mortgage rates are rising again after a falling below 6 percent earlier this month. The average 30-year fixed rate mortgage jumped to 6.50 percent yesterday, according to Freddie Mac.

The seasonally adjusted estimate of new houses for sale at the end of January was 439,000, according to the Census Bureau, marking slightly less than eight months’ supply at the current sales rate. The median sales price of new houses sold last month was $427,500.

Separate data released earlier this week revealed that existing home sales declined for the 12th consecutive month in January to a seasonally adjusted annual rate of 4 million.

“Home sales are bottoming out,” National Association of Realtors (NAR) chief economist Lawrence Yun said earlier this week. “Prices vary depending on a market’s affordability, with lower-priced regions witnessing modest growth and more expensive regions experiencing declines.”

Total housing inventory was up slightly from December to 981,000 units, which Yun said could serve as a boost for buyers.

“Inventory remains low, but buyers are beginning to have better negotiating power,” Yun added. “Homes sitting on the market for more than 60 days can be purchased for around 10% less than the original list price.”

Tags existing home sales housing market Lawrence Yun mortgage