New Single-Family Home Sales Fell in February as Prices Show Signs of Plateauing

Sales of new single-family homes fell in February, declining 2.0 percent to 772,000 at a seasonally-adjusted annual rate from a 788,000 pace in January. The February drop follows an 8.4 percent decline in January and leaves sales down 6.2 percent from the year-ago level (see first chart). New home sales surged in the second half of 2020 but then slowed sharply in the first three quarters of 2021, hitting a low of 667,000 in October. Following the October low, sales posted two strong gains in November and December but have reversed some of those gains in early 2022 (see first chart).

Sales of new single-family homes were down in two of the four regions of the country in February. Sales in the South, the largest by volume, fell 1.7 percent while sales in the West dropped 13.0 percent. Sales in the Midwest increased 6.3 percent while sales in the Northeast, the smallest region by volume, surged 59.3 percent for the month. From a year ago, sales were up 7.5 percent in the Northeast but are off 19.2 percent in the Midwest, down 9.3 percent in the West, and off 3.0 percent in the South.

The median sales price of a new single-family home was $400,600 (see top of second chart), down sharply from $427,400 in January (not seasonally adjusted). The gain from a year ago is 10.7 percent versus a 14.5 percent 12-month gain in January and significantly lower than the 20-plus percent gains in the second half of 2021 (see bottom of second chart). On a 12-month average basis, the median single-family home price is still at a record high (see top of second chart).

The total inventory of new single-family homes for sale rose 2.3 percent to 407,000 in February, putting the months’ supply (inventory times 12 divided by the annual selling rate) at 6.3, up 3.3 percent from January and 40.0 percent above the year-ago level (see third chart). The months’ supply is at a relatively high level by historical comparison and is substantially higher than the months’ supply of existing single-family homes for sale (see third chart). The relatively high months’ supply and surge in mortgage rates may be among the reasons for slowing gains in the median home price. The median time on the market for a new home remained very low in February, coming in at 2.5 months versus 2.9 in January.

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