US new home sales fell but supply crunch eases in February

WASHINGTON — After months of high prices and scarcity, the supply of new US homes on the market increased in February, though sales fell once again amid rising lending rates, according to government data released on Wednesday.

Sales of new homes fell two per cent last month to an annual rate of 772,000, seasonally adjusted, and January sales were revised down sharply, the Commerce Department said. 

The result was substantially worse than analysts expected.

The US real estate market boomed during the Covid-19 pandemic thanks to the Federal Reserve's easy money policies and the disruptions to daily life caused by the coronavirus.

However, the boom started to fade as available properties grew scarce and prices surged, and now is being hit by the Fed's interest rate hikes aimed at lowering inflation that have tightened borrowing conditions.

"We are braced for sales (to) quickly to return to their pre-Covid level and then drop to multi-year lows in the late summer. With inventory already quite high, at just over six months, the rate of price gains will slow sharply too," Ian Shepherdson of Pantheon Macroeconomics said.

The supply of new real estate for sale last month ticked up for the second month, rising to 407,000, an increase of 9,000 compared to January, which is equal to a 6.3 months supply at the current sales pace, the report said.

Meanwhile, the median sales prices, not seasonally adjusted, fell in February to $400,600, much lower than the month prior, when it came in at $427,400. However, the average sales prices rose to $511,000 from $494,000 in January.

Sales were uneven across regions, shooting up 59.3 per cent in the Northeast and growing 6.3 per cent in the Midwest. But in the West, they fell 13 per cent, while in the South, the drop was nearly two per cent.