February New-Home Sales Ease From January's Peak

March 25, 2020

After reaching a 13-year high in January, sales of newly built homes posted a decrease last month. Builders predict sales of new homes to temporarily recede over the coming weeks due to the COVID-19 pandemic.

New-home sales dropped 4.4% in February compared to the previous month, the Commerce Department reported Tuesday. Sales were at a seasonally adjusted annual rate of 765,000 in February, and with the dip largely predating the coronavirus outbreak, some economists suggested that it was an effect of the rainy weather across the country in February. The coronavirus outbreak in the U.S. has caused mass shutdowns largely over the last two weeks.

Despite the monthly drop in February, new-home sales were still 14.3% higher than a year ago. February’s new-home sales reading still marks the highest monthly sales pace since July 2007.

“Sales were on solid footing as we entered 2020, but this could be the high-water mark for the next few months as consumers contend with the coronavirus outbreak,” says Dean Mon, chairman of the National Association of Home Builders.

Meanwhile, the National Association of REALTORS® reported late last week that existing-home sales posted its strongest month since February 2007. The median price of an existing-home was $270,100 in February, up 8% from a year ago, with prices rising in every region of the U.S. (Read more from NAR’s latest housing report: Strong February Sales Point to Market’s Sound Foundation)

As for the new-home sector, the median sales price of a new home in January was $345,900 (compared to $320,800 a year earlier). Inventories dropped 6.7% last month to 319,000, which represents a five-month supply at the current sales pace.

“The February numbers reflect the strong state of the market before coronavirus concern set in,” says Robert Dietz, NAHB’s chief economist. “Given the momentum in the housing market at the start of the year, we do expect sales and construction activity to weaken during the third quarter; but housing’s potential suggests it will be a sector that will help the lead the economy during the eventual rebound once virus mitigation is complete.”

Regionally, new-home sales in February jumped 38.9% in the Northeast and were 1% higher in the South. Sales posted monthly drops of 17.2% in the West and a 7.3% decrease in the Midwest, the Commerce Department reports.