New home sales in February totaled 640k, 10k less than expected and January was revised down by about 40k to 633k. Smoothing out this volatile data point has the 3 month average at 632k vs 603k over the past 6 months and 612k over the past yr. Regionally, home sales in the South rose to the highest since last August while those in the Northeast fell to the weakest since last June. Coincidence or the population shifts taking place in the US? I’ll put some chips on the latter. Months’ supply was little changed at 8.2, still elevated but off the peak last September of 10.1 and not all of those homes are complete or even started. Prices rose 2.5% y/o/y but doesn’t include the other incentives builders are providing like rate buydowns.
Bottom line, the housing market is in a weird spot. I say this because of all the cross currents. We still have lean inventories of existing homes that is keeping the price of those homes still high. Speaking from experience at least in the Northeast, prices are high, bidding wars above ask are still taking place but we have to wonder how long this can last. For new homes, before the sharp rise in mortgage rates, supply started to tick up but it’s mostly in the lower priced homes that we most need it but also the most difficult to deliver at a good enough profit margin. And, the access to credit for builders is now getting tighter and for the first time buyer, it’s a real challenge to purchase a home for many. All this at the same time that 90% of existing mortgages have an interest rate below 5% and 70% below 4% which is keeping families in their home for longer so as not to give that up.