New home sales unexpectedly fell last month to the lowest level since November, continuing a recent slowdown in the scorching housing market, but economists are not convinced the deceleration will help lower home prices This year.
Sales of new single-family homes last month totaled 772,000 on a seasonally adjusted basis, down 2% from January and 6% from a year earlier, according to a report released Wednesday by the US Census Bureau.
The median selling price for new homes was $400,600, down from $423,300 in January, but average prices rose from $496,600 to $511,000, topping $500,000 for the first time ever, the report said. government.
Despite falling new home sales, Bank of America economists said in a Monday note they believe new home sales will rebound to 800,000 this year given pent-up demand due to supply issues. recent developments and persistent tightening, or low supply and high demand, in the market.
The main beneficiary of the pandemic-era narrowness will be home prices, Bank of America said, predicting the average home price will rise another 10% this year.
Not everyone is so bearish: Ian Shepherdson, chief economist at Pantheon Macroeconomics, wrote in a Monday note that the housing market is in the early stages of a “substantial slowdown” in activity that will help prices to moderate, but not to fall, as soon as this spring.
Shepherdson points out that although the average monthly mortgage payment jumped by more than $400 per month, data from the Mortgage Bankers Association showed an 8% drop in loan applications, foreshadowing a market slowdown that could deter many sellers. potential to put their homes up for sale.
“This year will likely be a much tougher year for the housing market given significant affordability headwinds and ongoing supply-side challenges,” said Bank of America’s Alexander Lin. “The Russian-Ukrainian conflict adds a new factor to the mix, as rising oil and commodity prices will weigh on the consumer’s ability to spend elsewhere, increase uncertainty and fears of recession, and drive up input costs. higher for builders.”
Historically high savings rates and unprecedented government stimulus efforts have helped spark a home-buying frenzy during the pandemic. The median home sale price was $346,900 last year, up 17% to the highest level on record, according to the National Association of Realtors. In addition to a cash-flooded economy, “chaotic” supply chains have also contributed to housing shortages and rising prices, according to Bank of America. “Builders got bogged down,” Lin said, noting that houses under construction last year exceeded the number of houses built for the first time in history, while the number of houses licensed but not started hit a record high. record level.
The Federal Reserve last week raised interest rates for the first time in more than three years, launching a series of rate hikes that will make a slew of debt issues, including future mortgages, more expensive. . “Market volatility and wartime uncertainties have dampened rising mortgage rates,” says Greg McBride, chief financial analyst at Bankrate, while warning that home equity lines of credit almost always feature variable rates that would experience an almost immediate increase, and fixed rates. The average 30-year fixed-rate mortgage rose from 3.4% to 4.9% during the last Fed hike cycle.
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