Key Takeaways From the January New Home Sales Report

By Aaron Terrazas on 24 Feb 2016

• January new home sales fell 9.2 percent month-over-month, to 494,000 units (SAAR), according to the Census Bureau.
• Compared to a year-earlier, new home sales fell 5.2 percent and have been largely flat over the past year.
• The median price of new homes sold fell to 17-month lows, with the largest declines in the mid-to-upper price ranges.

January new home sales retreated after a strong December, falling 9.2 percent month-to-month to 494,000 units at a seasonally adjusted annual rate (SAAR), according to the U.S. Census Bureau (figure 1). January new home sales were down 5.2 percent from a year earlier, and have been roughly flat over the past year.

New home sales have declined on an annual basis only twice in the past 19 months, and only six times in the past 52 months. Returning to the see-saw pattern of recent months, new home sales and existing home sales again moved in opposite directions in January.

January new home sales were particularly weak in the West, where sales fell to 110,000 units (SAAR), the lowest level since mid-2014. After increasing steadily from mid-2014 through mid-2015, sales in the South and the West have been flat or slightly down over the past half year. Sales in these two regions typically account for the bulk of new home sales, historically averaging 74 percent of the nationwide total and currently hovering around 80 percent.

One silver lining in the otherwise mostly disappointing January new home sales report was median sale price. The seasonally adjusted median price of new homes sold in January fell 3.2 percent from December and was down 4.6 percent year-over-year, to $282,600. The largest declines in sales were in the mid-to-upper price ranges. While this could mean builders are beginning to focus on constructing more entry-level homes, less supply at the top of the market does not necessarily translate into more supply at the bottom of the market.