Americans are forming households at double the pace of housing starts for the past six months, says MarketWatch. It could be a sign that strong demand will continue despite new-home sales dropping and mortgage rates rising in February. Builders are facing supply chain and materials issues, but February’s winter weather greatly impacted the number of new-home starts as well. MarketWatch analysts projected new-home sales to occur at a seasonally-adjusted annual rate of 879,000, but February starts only reached 775,000. Despite dropping 18.2% since January, new-home construction remains 8.2% higher than February 2020.
What happened: New-home sales fell on a monthly basis across all parts of the country, led by a 37.5% decline in the Midwest. Compared to 2020, sales were up in the Midwest and South, but down in the West and Northeast.
Inventory rose to a 4.8-month supply. A six-month supply of homes is generally considered indicative of a balanced market. The median price of new homes for sale was $349,400, down roughly 1% from January.
The big picture: As with other economic data, the pace of new home sales was certainly affected by the extreme weather events that affected many parts of the country last month, including Texas. These effects were certainly temporary, but rising mortgage rates could create a broader, longer-lasting headwind for the housing market.
Nevertheless, analysts expect building activity to persist even as higher interest rates cause some buyers to become skittish about their ability to afford to buy a home.
Advertisement
Related Stories
Market Data + Trends
Vacation and Investment Home Market Insights
A recent report finds beach homes to be the most sought-after vacation-home type and that the investment potential of a second home is an important factor in the purchasing decision
Affordability
How Much Income Do First-Time Buyers Need to Afford the Average Home?
The median-priced home is unaffordable in 44 of the 50 largest U.S. metro areas
Affordability
What Is the Relationship Between Urban vs. Suburban Development and Affordability?
A new paper from Harvard's Joint Center looks at whether expanding the supply of suburban housing could, in turn, help make dense urban areas more affordable