What happened: Newly built home sales fell slightly in February despite early signs of a moderate increase in housing demand and rising builder confidence.
Why it matters: In sharp contrast with existing home sales, which increased sharply in February, sales of newly built homes fell slightly this month. The increase in the supply of existing homes could be slightly eroding part of the advantage builders enjoyed most of last year.
Although it might be tempting to look at a single data point and conclude that demand for new homes and home sales may be slowing, it’s important to remember that even with a notable rise in new construction, the months’ supply has held steady compared to last year. This is because the supply of newly built homes has barely kept up with the increased demand over the past year.
Second, builders are building smaller, slightly less expensive homes and continue to offer incentives – like rate buydowns – to make the math work for prospective buyers. The change in the size of new homes that has helped to lower prices combined with incentives should continue to support new home sales this spring shopping season.