WASHINGTON (Reuters) – Sales of new U.S. single-family homes increased to a six-month high in February, the latest indication that the housing market could be close to finding a floor after being hammered by higher mortgage rates.
New home sales rose 1.1% to a seasonally adjusted annual rate of 640,000 units last month, the highest level since August, the Commerce Department said on Thursday. January’s sales pace was revised lower to 622,000 units from the previously reported 670,000.
New home sales are counted at the signing of a contract, making them a leading indicator of the housing market. They have now increased for three straight months.
Economists polled by Reuters had forecast new home sales, which account for a small share of U.S. home sales, falling to a rate of 650,000 units. The surprise increase came despite mortgage rates rising from early February through early March after mostly dropping since November, according to data from mortgage finance agency Freddie Mac.
Monthly sales rose in the South and West. They fell in the Midwest and plunged 40.0% in the Northeast. Sales were down 19.0% on a year-on-year basis in February.
The housing market has borne the brunt of the Federal Reserve’s aggressive interest rate hikes to tame high inflation, with residential investment contracting for seven straight quarters, the longest such streak since the collapse of the housing bubble triggered by the 2007-2009 Great Recession.
But the housing market could be close to bottoming out. Data on Tuesday showed sales of previously owned homes rebounding for the first time in a year in February. Homebuilder sentiment improved for a third straight month in March, while single-family housing starts and building permits rose in February.
Mortgage rates are falling again in tandem with a sharp decline in U.S. Treasury yields following the recent collapse of two U.S. regional banks that sparked fears of contagion in the banking sector. Nevertheless, the housing market is not out of the woods yet. Banks have tightened lending standards, which could make it harder for prospective homebuyers to borrow.
The Fed on Wednesday raised its benchmark overnight interest rate by a quarter of a percentage point, but indicated it was on the verge of pausing further increases in borrowing costs.
The U.S. central bank has hiked its policy rate by 475 basis points since last March from near-zero to the current 4.75%-5.00% range.
The median new house price in February was $438,200, a 2.5% rise from a year ago. There were 436,000 new homes on the market at the end of last month, down from 439,000 in January. At February’s sales pace it would take 8.2 months to clear the supply of houses on the market, down from 8.3 months in January.
(Reporting by Lucia Mutikani; Editing by Andrea Ricci)
