U.S. new-home sales soared last month to an annualized rate of 764,000, according to the latest numbers from the U.S. Census Bureau and the U.S. Department of Housing and Urban Development.
January’s rate marks the highest level of new-home sales since July 2007 and a jump of 7.9% from the pace of December 2019. That month’s figure was upwardly revised from 694,000 units to 708,000. On a year-over-year basis, last month’s sales improved 18.6% from the January 2019 estimate of 644,000.
Polls of economists by Reuters and Bloomberg had estimated January new-home sales would reach a rate of 710,000 to 718,000 units, so actual figures surpassed industry forecasts by a wide margin.
“After ending an otherwise strong 2019 on a down note, declining for three straight months, sales of new homes started the new year off on the right foot,” said Zillow economist Matthew Speakman. “January’s figures suggest that buyers are making good on the optimism they’ve expressed in recent months.”
Sales jumped 30.3% month over month in the Midwest region and 23.5% in the West. The Northeast saw a more muted monthly increase of 4.8%. The South was the only region to see a loss compared to December, decreasing 4.4%. Year over year, the West, Midwest and Northeast regions had increases of 49.1%, 47.8% and 46.7%, respectively, while the South experienced a 2.4% drop.
Several factors contributed to the spike, from growth in residential building to an unseasonably warm winter. The sales surge also benefited from continued strength on the consumer side of the economy, with housing demand boosted by mortgage rates at near-record lows and a robust job market. And with the inventory of existing homes at historical levels of shortage, buyers are increasingly flocking to newly built homes.
The question, Speakman said, is whether there will be homes available to meet demand. Currently, there are 324,000 new homes listed for sale, a supply of 5.1 months at the present sales pace.
“Builders have been making some decent progress, but it will take a lot more than a few months of good work to dig out of the inventory hole the market is experiencing,” Speakman said. “Today’s release is a step in the right direction as it should incentivize builders to continue their improved rate of construction. The housing market will need more of these going forward if it’s going to carry its positive momentum through the entirety of 2020.”
Homebuilding numbers from January offer reasons for continued optimism. Building permits rose to a seasonally adjusted annual rate of 1.551 million — the highest level since early 2007.