February 26, 2013

New-home sales surge as supply shrinks

The release of pent-up demand, historically low interest rates and an improving labor market helped support robust new-home sales in January, NAFCU Research Assistant Doug Christman said.

The inventory of existing homes in January fell roughly 25 percent from the previous year. "With fewer bargains in the existing-home market, new homes are more appealing to home buyers," Christman said.

The months of supply, which is the measure of how many months it would take to clear the current inventory, is falling significantly for both existing and new homes, Christman said. "In fact, both are at historic lows."

On a year-over-year basis, the median new-home price rose from $221,700 to $226,400 in January on a non-seasonally adjusted basis. "Prices are rising as demand increases for new homes and inventory remains low," Christman said. "And the rise in prices, in turn, is helping to improve confidence."

All told, new-home sales in January increased 15.6 percent from an upwardly revised 378,000 units to 437,000 units, annualized. "That represents the highest level of activity since the summer of 2008," Christman said. "On a year-over-year basis, new-home sales were up 28.9 percent."