Sales of new homes increased slightly from January to February, a sign that buyers might be reentering the market amid lower mortgage rates.
New home sales in February increased from the month before, rising 1.1% last month to a seasonally adjusted annual rate of 640,000, according to a report Thursday from the Census Bureau. The reading follows recent declines in mortgage rates, which could be spurring more home purchases. Still, sales were 19% lower than in February 2022.
As of Wednesday evening, the average rate on a 30-year fixed-rate mortgage was 6.6%, down from its peak of over 7% in October and into November, according to Freddie Mac. But that number is up from a recent low of just about 6.1% registered in late January and early February. The rate on an average 15-year fixed-rate mortgage was 5.9%.
The median sales price for a new home was $438,000 in February, a slight increase from the month before.
Still, sales are still down by a large margin from the peaks notched in 2020, when the Fed had slashed interest rates to near-zero levels. The housing market is still in what most economists characterize as a recession, and there continues to be fear that the downturn is a harbinger for a broader economywide recession.
The Fed once again hiked interest rates on Wednesday by a modest quarter of a percentage point, even despite the uncertainty from the collapses of Silicon Valley Bank and Signature Bank. That means more pressure on mortgage rates this year.
Earlier this week, there was some big news in the housing market when existing home prices dropped from February 2022 to last month, marking the first such decline after about 11 years of increases.
The median existing-home price for all housing types was $363,000, the National Association of Realtors reported — a decline of 0.2% from February 2022. The 131-month streak in housing price growth that was broken is the longest on record.
Some economists expect bigger declines in home prices this year as some overheated housing markets post big drops.
Goldman Sachs researchers earlier this year predicted that housing prices in Austin, Texas, would fall by more than 15% this year alone. Likewise, Phoenix, Denver, and Seattle will see home prices dropping more than 10% this year and falling in 2024, as will the California cities of San Diego and San Francisco, according to the report.