US new-home sales rise slightly following weather-related plunge
Despite the rebound in February, builders have grown more cautious lately against a backdrop of increased home supply and the sustained effects of high mortgage rates and prices
[ATLANTA] Sales of new homes in the US bounced back slightly last month from a rocky start to 2025 as homebuilders benefited from better weather while leaning on generous sales incentives to stoke demand.
Contract signings on new single-family homes increased 1.8 per cent in February to a 676,000 annualised rate, after slumping a month earlier during a bout of severe winter storms. The median estimate in a Bloomberg survey of economist was for a 680,000 annual rate.
Sales in the South, the US’s biggest homebuilding region, rose 6.6 per cent last month after heavy snowfall kept buyers on the sidelines a month earlier. Purchases also rose in the Midwest, according to Commerce Department data released on Tuesday (Mar 25).
Despite the rebound in February, builders have grown more cautious lately against a backdrop of increased home supply and the sustained effects of high mortgage rates and prices. That combination indicates residential investment will provide limited support for the economy.
“Consumers are working through affordability concerns and uncertainties related to macroeconomic and geopolitical issues, which are causing them to move slowly in their homebuying decisions,” KB Home chief executive officer Jeffrey Mezger said on Monday in a press release announcing the company’s earnings. KB Home missed its first-quarter sales goals and cut its fiscal 2025 revenue guidance.
Builders have responded with more incentives, including making up-front payments on customers’ behalf to lower their mortgage rates, and they are also starting to cut prices more often. Price cuts are likely meant to clear out the growing supply of “spec homes”, which contractors build without having any specific customer in mind, Bloomberg Intelligence analyst Drew Reading said in a note last week.
Last month, the supply of new homes for sale increased 0.8 per cent to 500,000 – the highest level since 2007. The number of completed homes awaiting purchase was the highest since July 2009.
Meantime, the median sale price of a new home decreased 1.5 per cent from a year ago to US$414,500.
One positive development moving into spring, the most important period for home sales, is a moderation of borrowing costs. While 30-year, fixed mortgage rates bumped up slightly to 6.72 per cent in the week ended Mar 14, they are lower than the 7.1 per cent reached in January, according to Mortgage Bankers Association data. The bankers group sees rates falling slightly to 6.5 per cent by the fourth quarter, its forecast shows.
At the same time, household sentiment is weakening on concerns about higher prices and the economic outlook. Consumer confidence fell in March to a four-year low, according to a report from The Conference Board released on Tuesday.
New-home sales are seen as a more timely measurement than purchases of previously owned homes, which are calculated when contracts close. However, the data are volatile. The government report showed 90 per cent confidence that the change in new-home sales ranged from a 16.8 per cent decline to a 20.4 per cent gain.
On Thursday, the National Association of Realtors will release data on February contract signings for previously owned homes. BLOOMBERG
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