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Sales of new U.S. single-family homes unexpectedly fell in February after mortgage rates increased during the month. Still, the underlying trend remained strong amid a chronic shortage of previously owned houses.
The report from the Commerce Department on Monday also showed that the median new house price last month was the lowest in more than 2 1/2 years, while supply was the highest since November 2022.
Builders are ramping up construction while offering price cuts and other incentives and reducing floor sizes to make housing more affordable.
“Housing activity is stabilizing as homebuilders appear to be building cheaper, and therefore, likely smaller homes,” said Conrad DeQuadros, senior economic advisor at Brean Capital.
“Sales have been relatively stable at December’s level over the last two months, and prices have been falling at mid-single-digit rates on a year-over-year basis.”
New home sales slipped 0.3% to a seasonally adjusted annual rate of 662,000 units last month, the Commerce Department’s Census Bureau said.
The sales pace for January was revised up to 664,000 units from the previously reported 661,000 units. Economists polled by Reuters had predicted new home sales, which account for 13.1% of U.S. home sales, might rise to a rate of 675,000 units.
Since March 2022, the new homes market has defied 525 basis points worth of interest rate strolls from the Federal Reserve, bolstered by a shortage of previously owned houses for sale.
The overall housing market has likely turned the corner, with home resales surging to a one-year high in February. Nonetheless, supply remains inadequate, keeping house prices elevated and homeownership out of the reach of many.
According to data from mortgage finance agency Freddie Mac, the average rate on the famous 30-year fixed-rate mortgage jumped to 6.94% in late February before retreating to just below 7.0% by mid-March. The U.S. central bank is foreseen to start cutting rates sometime this year.
Stocks on Wall Street were trading lower. The dollar rose against a basket of money. U.S. Treasury prices fell.
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