Housing News

New Home Sales Rise as Prices Fall

In another sign of the housing market beginning to warm back up, more buyers purchased new homes in February.

Sales of newly constructed residences ticked up 1.8% from January to February, according to a monthly report from the U.S. Census Bureau and U.S. Department of Housing and Urban Development. New home sales were up 5.1% compared to February of last year.

This may be at least partly due to lower prices as more new construction hits the market.

The median price of a newly built home was $414,500 in February, according to the report. That was down 3% from the previous month and was 1.5% less than a year earlier.

Those lower prices are likely at least partially due to an increase in the number of new homes on the market. There were roughly half a million new builds for sale in February—that’s the most since 2007.

The kinds of homes for sale may also be responsible for the lower price tags.

“Smaller and more affordable new homes make up a sizable portion of [housing] inventory and sales,” wrote Realtor.com Senior Economist Joel Berner.

About a third of homes sold in February were priced between $300,000 and $399,999, a big jump from the previous year.

“The [housing] inventory build-up suggests that new home buyers are starting to pull back,” Bright MLS Chief Economist Lisa Sturtevant said in a statement. The multiple listing service covers the mid-Atlantic region. “Now, buyers have gained some leverage and have more listings to choose from.”

Where are new home sales rising and falling?

There was more new construction in the South and Midwest, where more land is available at lower prices, than in the pricier Northeastern and Western regions of the country.

In February, new home sales plummeted 48.8% year-over-year in the Northeast. They also dropped 11.4% in the West.

“Weather could have played a role in February new home sales,” Sturtevant said. Winter storms may have been responsible for some of the fall in the Northeast, she said.

However, the number of buyers who closed on new homes surged 19% year-over-year in the more affordable South. Sales also ticked up 2.7% in the Midwest.

“There is a common misconception that newly-built homes are too expensive for the typical buyer, but especially in the South, we see that this is not the case,” Berner wrote.

“Builders are prioritizing delivering more affordable new inventory and the cost of ownership for new homes tends to be lower than existing homes," he wrote.