New single-family home sales represent the number of brand-new houses that were purchased or committed to being purchased over the course of a month. This data is collected from the Selling Office Commission and local building permit offices, under the assumption that new houses built are being built to sell. This indicator has a trickle-down effect, as demand rises for durable goods and consumer spending increases, boosting GDP. When people purchase a home, they buy goods to fill their homes with, lifting other sectors simultaneously. New home sales are also more impactful to GDP than existing home sales since the entire sale value is included instead of only the real estate commission being included for an existing home during the sale.
In January, new residential sales grew by 4.29% to a total of 923,000, up from 885,000 for the previous month. New home sales have grown by 19.25% since January of 2020, when 774,000 units were sold. Sales in the Midwest increased the most, growing by 12.6% to a total of 107,000. Sales in the West and South regions saw more modest growth, rising by 6.8% and 3.0% respectively. However, sales in the Northeast saw a considerable decline, falling by 13.9% to 31,000 units. The median sales price of a new home decreased by 1.9% to $346,400 last month.
Last month, sales of new homes rose to a three-month high as buyers continued to take advantage of historically low mortgage rates. Housing inventory continued to decline and currently sits at 1.04 million, signaling that demand remains strong despite rising prices. At the current pace, it would take approximately four months to exhaust the supply of new homes. Builder backlogs remain elevated, indicating that residential construction will remain firm over the next several months. The Pending Home Sales index also increased by 7.66% last month, which serves as another indicator of robust demand for housing since pending sales are likely to become existing sales in the near future. Overall, most indicators suggest that the housing market will remain strong throughout 2021 as rates remain low compared to historical averages and new homes continue to be built to meet the rising demand.
February 25, 2021