Sticker shock keeps new-home sales down for fifth straight month
While overall housing sales have suffered due to affordability, the trend is even more drastic for typically higher-priced new homes, according to Redfin.
Sales of new homes dropped 8% year-over-year in January after falling 12.6% in December and 4.2% in November. It marks the fifth consecutive month sales fell nationwide.
The median new-home sales price was $339,000 in January compared to $285,900 of all existing sales. The Northeast led all regions with a median new-home price of $479,950 and year-over-year growth of 6.8%.
"The shrinking size of sales declines, paired with falling interest rates, may be helping to improve builder confidence, which has been on the rise since December," Daryl Fairweather, Redfin's chief economist, said in a press release. "Still, buyers understand that the market is shifting in their favor and have become more sensitive to high home prices. That added sensitivity could continue to put a damper on the sales of new homes, which tend to be more expensive than comparable existing ones."
The West experienced the largest drop of any region in annual new-home sales, falling 16.5% in January. Sales of new homes in the Midwest followed with a decline of 8.7%. The Northeast — which hasn't seen positive change since January 2017 — dropped 6.6%, while the South rounded out the quartet with a 4.7% decrease.
The sales cycle decelerates during winter, but the recent slowdown is an accumulation of stock market uncertainty along with the high prices and low supply.
"While winter months are notoriously volatile and difficult to interpret due to large seasonal factors, home buying activity continues to trend lower," said Mark Vitner, senior economist with Wells Fargo Securities. "Recent softness is a reflection of the deteriorating affordability seen throughout 2018, alongside low inventories, rising home prices and higher mortgage rates."