After two consecutive months of gains, New Home Sales (which measure signed contracts on new homes) inched down 0.3% from January to February. While the media tried to put a negative spin on the report, home sales remaining stable in February shows some strength given that rates moved higher when compared to January. Plus, sales were also 5.9% higher than a year earlier, as the persistent shortage of previously owned homes for sale continued to fuel demand for new construction.
What’s the bottom line? The media also pointed to the decline in the median home price, which was down 3.5% from January and 7.6% from a year ago, to say the report was a miss. But the median home price did not decline because of falling home prices (which continue to hit new highs per Case-Shiller and other indexes), or a growing number of price cuts from builders. In fact, just 24% of builders reported slicing prices in March, down from 36% in December and the lowest share since last July per the National Association of Home Builders.
The median home price represents the mid-price of sales, meaning it’s influenced by the mix of sales in any given month. February’s decline in the median home price stems from the sale of more homes at lower price points. Builders are constructing smaller, more affordable homes to meet buyer demand, and that pushed the median home price lower comparatively.