The numbers: Sales of newly built homes occurred at a seasonally-adjusted annual rate of 923,000 in January, the U.S. Census Bureau reported Wednesday. That was 4.3% above the upwardly-revised pace of 885,000 in December.
Analysts polled by MarketWatch had projected new-home sales to occur at a seasonally-adjusted annual rate of 850,000.
Compared to 2020, January’s figure was up roughly 19% year-over-year. Because of the small sample size used in producing the report, it is prone to large revisions from month to month.
What happened: New-home sales rose across most parts of the country, led by a 12.6% increase in the Midwest. The Northeast was the only region where sales declined — there, they dropped by nearly 14%.
Compared to 2020, sales were up in the Midwest and South, but down in the West and Northeast.
Inventory dropped slightly to a four-month supply. A six-month supply of homes is generally considered indicative of a balanced market. The median price of new homes for sale was $ 346,400, down roughly 2% from December.
The big picture: The trends that propelled the market for new homes last year have so far remained in place. Demand among home-buyers is still high, particularly as telework makes living further from major work centers more feasible. Plus, millennials are now in their peak home-buying years, and with growing families many are taking the plunge to become homeowners.
At the same time, the inventory of existing homes for sale continues to hover around record lows. This is, in part, a by-product of the many years where home-building activity was depressed following the start of the Great Recession.
The lack of existing homes for sale is also a reflection of how anxious many would-be sellers are because of the pandemic. Even with homes fetching record-breaking prices, many sellers have remained on the sidelines.
But that could soon be changing. A new survey from Zillow found that 70% of homeowners said they would feel comfortable moving to a new home if there were widespread vaccine distribution, compared with just 52% who feel that way as things stand now.
“We expect that the vaccine rollout will likely boost inventory, as sellers become increasingly willing to move despite Covid-19 — resulting in greater numbers of new listings beginning this spring,” Chris Glynn, principal economist at Zillow Z,
That doesn’t mean that new-home sales will suffer however. All those sellers will need somewhere to live after offloading their current properties, so the vaccine is likely to increase demand, Glynn warned.
What they’re saying: “New home sales per capita remain well below previous cyclical peaks…so the scope for sustained increases in demand is substantial,” said Ian Shepherdson, chief economist at Pantheon Macroeconomics.
“Affordability concerns loom in terms of building material costs and higher interest rates,” Robert Dietz, chief economist at the National Association of Home Builders, said on Twitter TWTR,
Market reaction: The Dow Jones Industrial Average DJIA,
Homebuilder stocks — including D.R. Horton DHI,
