Sales of new US single-family homes jumped to a 10-month high in January as prices declined, but a resurgence in mortgage rates could slow a much anticipated housing market turnaround.
New home sales increased 7.2% to a seasonally adjusted annual rate of 670,000 units last month, the highest level since March 2022, the Commerce Department said on Friday. December’s sales pace was revised higher to 625,000 units from the previously reported 616,000.
New home sales are counted at the signing of a contract and are considered a leading housing market indicator. On a regional basis, sales surged in the South but slumped in the Midwest, Northeast and West. Economists polled by Reuters had forecast new home sales, which account for a small share of US home sales, would increase to a rate of 620,000 units.
Sales declined 19.4% on a year-on-year basis in January.
The housing market has been the biggest casualty of the Federal Reserve’s aggressive interest rate hikes. Residential investment has contracted for seven straight quarters, the longest such stretch since 2009.
There are signs the worst of the housing market rout is likely over. Sales of previously owned homes fell modestly in January, while confidence among single-family homebuilders rose to a five-month high in February, though it was still depressed.
But a turnaround in the housing market is probably still far off. Mortgage rates have resumed their upward trend after robust retail sales and labor market data as well as strong monthly inflation readings raised the prospect of the central bank hiking interest rates into the summer.
The 30-year fixed mortgage rate increased to an average of 6.50% this week from 6.32% in the prior week, according to data from mortgage finance agency Freddie Mac. The third straight weekly increase lifted the rate to a three-month high.
The median new house price in January was $427,500, a 0.7% drop from a year ago. There were 439,000 new homes on the market at the end of last month, down from 452,000 in December.
At January’s sales pace it would take 7.9 months to clear the supply of houses on the market, down from 8.7 months in December.