Decline in Sale of US New Homes for First Time in Three Months

    According to Bloomberg News, the sale of new homes in the US took a retreat in January after a purchasing spree towards the end of 2021, implying a jump in the mortgage rates that may be restraining demand.




    For new single-family houses, the purchase declined 4.5% to 801,000 annualized pace after a revised 839,000 in December, as data from the government revealed Thursday. As per Bloomberg survey by economists estimates the median to be 803,000 rates.

    While the subtle demand for new homes is concrete, triggered in part by low inventory at record levels in the resale market, the highest mortgage rates since the mid of 2019 indicate a headwind. Higher costs of materials contribute to inflation in housing and sideline the prospective shoppers.

    With further moderation in the sales, it is likely to help builders chip away at backlogs for construction that remain elevated due to the delays in transportation and supply.

    The new home sales report released by the Census Bureau and Department of Housing and Urban Development indicates that the median sales price of a newly constructed home surged 13.4% compared to a year earlier to $423,300.

    Towards the end of January, the number of new homes for sale was 406,000, which is the most since 2008, although approximately 26% of these houses were the ones whose construction had not begun yet. Given the current pace of sale, the time to exhaust the supply of new homes is approximately 6.1 months, compared to 3.6 months that was one year earlier.



    Waiting for construction to complete

    The total number of homes sold in January and the ones waiting for the construction to begin, which is a measure of the backlog, surged from one month earlier to around 237,000. The total number of homes that were sold and the ones still under construction was found to be 368,000.

    There was a drop in sales in four regions in the United States. Purchases dropped 10.7% in the Northeast, it dropped by 7.4% in the South, and there was a decline of 3.7% in the Midwest.

    Independent data from last week indicates purchases of used homes that constitute most of the housing market surged the previous month to a one-year-high due to solid demand and a hurry to get ahead before the rising rates.

    Bloomberg News reports that as far as new home purchases are concerned, it accounts for 10% of the total market and is usually calculated while contracts are signed. It is a better barometer than the purchase of previously owned houses that are calculated when the contracts come to a close.

    Data of new homes are volatile, and as per the report, it showed 90% confidence that the sales change ranged from a 20.7% drop to an 11.7% surge.



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