After seeing an increase in sales last year, the state’s new home market fell sharply in new home sales activity in January, according to the US Census BureauThe New Residential Sales report was released on Thursday.
Economists say this may decrease temporarily due to bad weather, or sales figures may be revised next month. Still, demand remains low amid a weak labor market and consumer uncertainty. The conflict in the Middle East complicates the picture, at least in the short term.
“Sales of newly constructed homes fell 17.6% in January to 587,000 on the year from December’s revised downward reading,” said Jing Fu, senior director of forecasting and analysis. National Association of Home Buildersin short. “The rate of new home sales was down 11.3% compared to a year ago. According to the three-month moving average, sales were 688,000, still broadly in line with the 685,000 pace seen last year.
The median sales price in January also fell 4.5% month-over-month and 6.8% year-over-year to $400,500, the Census concluded.
Zillow Senior economist Orphe Divounguy told us Builder’s Day that he expects an upward revision from the 17.6% decline, which means that the actual decline in sales may not be as significant as initially reported.
There are also signs that new home sales have rebounded slightly after January. Zillow’s February housing market report showed demand for homes improved last month, indicating that January’s decline may be temporary.
Divounguy cited the unexpectedly harsh winter conditions in January as a possible reason for the poor sales numbers. First American The Deputy Head of Economics Odeta Kushi in an interview admitted that the weather plays a role. However, the weather was not the only factor at play.
“I think this is a little bit of climate change and I want to soften a little bit. I think it’s a little bit of both,” Kushi said.
If the Census data is not updated, the January figures will be the slowest sales movement since October 2022, according to Kushi. However, the report presents an incomplete picture, as some manufacturers reported good sales and demand to start the year.
Hovnanian Enterprises again Toll Brothersfor example, both reported slight increases in traffic and deposits in January and February compared to last year in recent earnings calls.
Clint Mitchell, CEO of the Indianapolis-based Houses in Estridgehe told Builder’s Day that his team had the best start they’ve ever had, and the weather wasn’t the reason. January was a strong month, and February sales were even better.
That’s because Indianapolis is a balanced market that doesn’t operate with the surplus that Sun Belt markets do. Another factor is the buyer Estridge Homes is targeting, as most of their properties are in the $800,000 to $1.2 million range.
The $500,000 to $700,000 segment has been a little weak so far this year, but the profile of high-income buyers — those above $800,000 — has done very well for Estridge Homes, Mitchell said. Those consumers are able to withstand market uncertainty and insolvency pressures.
“High-end buyers are a little more confident and strong right now, so that’s helping. And Indianapolis as a whole seems to be doing better than most of the rest of the country, so we’re probably in a positive market here,” Mitchell explained.
A picture of uncertain demand
Although mortgage rates are down significantly from last summer and affordability has improved slightly, overall demand remains soft as home builders enter the spring selling season.
The weak labor market is worrying, as the US lost 92,000 jobs in February, according to the report. In the US Bureau of Labor Statistics. January’s figure of 130,000 new jobs was revised down to 126,000.
The ongoing war with Iran also adds uncertainty to the mix, introducing supply chain disruptions and potentially eroding consumer confidence during the early days of the spring selling season. Buyers are paying at the tap, as the closure of the Strait of Hormuz has pushed oil prices north to $95 a barrel, from around $65 a barrel before the conflict began.
The 30-year fixed-rate mortgage rate rose from about 6.0% before the conflict to 6.22% as of March 19. There is still much uncertainty about how long the conflict in Iran will last and what long-term effects it will have, if any. However, there are short-term effects for sure.
“Of course the question is, is that going to be strengthened? What is the duration of the conflict and its final impact on inflation? Of course, if we see that oil prices remain elevated and start to enter inflation, that will have an impact on mortgage rates,” explained Kushi.
Divounguy expects that new home sales may be lower in 2026 than last year, in part because a slow increase in existing home sales creates competition for the new home market, which is accompanied by a decline in new homes. However, builders still have a lot of excess inventory, equivalent to 9.7 months worth in January, that they need to work with.
“What’s going on with oil prices and how that affects household budget issues, consumer confidence, and whether it’s time to start buying big things again, like buying a house, – that’s a big risk to our forecast,” said Divounguy.
