New home sales jump to 10-month high in January as prices fall

Sales of new single-family homes in the US jumped to a 10-month high in January as prices eased, but a recovery in mortgage rates could slow a much-anticipated turnaround in the housing market.

New home sales rose 7.2% to a seasonally adjusted annualized rate of 670,000 units last month, the highest level since March 2022, the Commerce Department said Friday. December sales rates were revised up to 625,000 units from the previously reported 616,000.

Sales of new homes are taken into account at contract signing and are considered a leading indicator of the housing market. Regionally, sales rose in the South but fell in the Midwest, Northeast, and West. Economists polled by Reuters had forecast new home sales, which account for a small share of U.S. home sales, to rise to 620,000 units.

Sales were down 19.4% year on year in January.

The housing market has been the biggest casualty of the Federal Reserve’s aggressive interest rate hikes. Housing investment has declined for seven straight quarters, the longest since 2009.

There are signs that the worst of the housing market crash is probably behind us. Owned home sales eased slightly in January, while confidence among single-family home builders surged to a five-month high in February, although it remained subdued.

But the turning point in the housing market is probably a long way off. Mortgage rates resumed their uptrend after robust retail sales and labor market data, as well as strong monthly inflation readings, increased the likelihood of a central bank rate hike in the summer.

The 30-year fixed mortgage rate increased to an average of 6.50% this week from 6.32% the previous week, according to data from mortgage finance agency Freddie Mac. The third weekly increase in a row lifted the rate to a three-month high.

The median price of a new home in January was $427,500, down 0.7% from a year ago. At the end of last month, there were 439,000 new homes on the market, up from 452,000 in December.

At the pace of sales in January, it will take 7.9 months to liquidate the supply of houses on the market, compared to 8.7 months in December.