In January, sales of new single-family homes in the United States rose 4.3%, surpassing expectations and reaching a three-month high, as buyers moved to take advantage of favorable mortgage rates before they began to edge up. According to government data released Wednesday, new home purchases increased to a seasonally adjusted annual rate of 923,000, up from an upwardly revised 885,000 in December. Forecasts had anticipated an 856,000 pace.
The median sales price for new homes also rose, reaching $346,400—a 5.3% increase from the previous year and a record high for January. Historically low mortgage rates have fueled a significant housing demand, with many Americans seeking larger spaces to accommodate remote work and schooling during the pandemic. This surge in demand has driven up prices and reduced inventory, potentially slowing the market just as borrowing costs begin to climb.
While mortgage applications for new home purchases dropped to a nine-month low last week amid rising rates and higher prices, the housing market remains robust. Elevated builder backlogs suggest continued momentum in residential construction, likely supporting economic growth in the coming months. Meanwhile, December data showed the largest year-over-year increase in home prices across 20 cities since 2014.
Despite softer-than-expected housing starts, applications for single-family home construction reached their highest level since 2006, with authorized but unstarted projects also at a 13-year high. Currently, it would take four months to deplete the available supply of new homes at the current sales rate.
Three of the four major regions in the US saw seasonally adjusted gains in home sales in January, including a notable 12.6% increase in the Midwest. Sales in the West and South rose by 6.8% and 3%, respectively. Additionally, the average home sales price climbed to $408,800, reflecting a shift toward higher-priced properties in the $500,000–$749,000 range.
New-home sales, which make up about 10% of the market, are tracked as soon as contracts are signed, providing a more immediate indicator of housing demand than sales of previously owned homes, which are recorded at contract close. These figures are typically more volatile but offer timely insights into the housing market’s trajectory.
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