Sales of new single-family homes in the United States rose to their highest level in 10 months in January as prices fell, but a resurgence in mortgage rates could slow the long-awaited turnaround in the housing market.
New home sales rose 7.2% to a seasonally adjusted annual rate of 670,000 units last month, the highest level since March 2022, the Commerce Department reported Friday. December’s sales pace was revised upward to 625,000 units from 616,000 previously recorded.
New home sales are counted at the time of contract signing and are considered a leading indicator of the housing market. Economists polled by Reuters estimated that these sales, which represent a small portion of home sales in the country, would increase at a pace of 620,000 units.
Sales fell 19.4% year-on-year in January.
The housing market has been the biggest victim of the Federal Reserve’s aggressive interest rate hikes. Residential investment has contracted for seven consecutive quarters, the longest period since 2009.
There are signs that the worst of the housing market downturn is over. Used home sales fell modestly in January, while confidence among single-family builders rose to a five-month high in February, though it remained depressed.
But a turnaround in the housing market is likely still some way off.
Mortgage rates have resumed their upward trend after strong retail sales and labor market data, as well as strong monthly inflation readings, raised the prospect of the U.S. central bank raising the cost of credit through the northern summer.
The interest rate on 30-year fixed mortgages rose to an average of 6.50% this week, up from 6.32% the previous week, according to data from mortgage finance agency Freddie Mac. The third consecutive weekly increase lifted the rate to a three-month high.
The median new home price in January was $427,500, down 0.7% from a year ago. There were 439,000 new homes on the market at the end of last month, down from 452,000 in December. At January’s sales pace, the supply of homes on the market would take 7.9 months to sell out, down from 8.7 months in December.