February 2025 New-Home Sales
What happened this month
New-home sales picked up slightly in February after a weaker January. The number of sales of new single-family homes reached a seasonally adjusted annual rate of 676,000, up 1.8% from January and 5.1% from February 2024. The month-over-month pickup was also seen in sales of existing homes in February, as some modest relief from high mortgage rates came in the second month of the year. The increased sales volume was accompanied by a decrease in the median sales price, which fell to $414,500 from $427,400 in January. This is a resumption of a trend that was bucked in January in which smaller and more affordable new homes make up a sizable portion of inventory and sales. This is evidenced further by the breakdown of new-home sales by price tier, in which February saw a huge jump in the $300,000–$399,999 category. In February, 34% of new homes sold fell in this $300,000-range category, the highest share in over a year and 7 percentage points higher than in January.
Regionally, the sales volume gains were concentrated in the more affordable South and Midwest, which saw 6.6% and 20.6% pickups from January respectively, and both regions are seeing more sales activity than a year ago. The pricier Northeast and West regions fell by 21.4% and 13.6% month over month, respectively, and are well below their level from February 2024. The South was already dominating the share of new-construction and new-home sales, and this strong sales showing in February only adds to the clear focus on new homes in the South, with 64.8% of new-home sales taking place in that region.
New-home share of inventory falling
Months of supply for new homes held steady, down to 8.9 in February from 9.0 in January, as the increase in sales pace was offset by growth in the number of new homes for sale on the market. A half-million new homes were available for purchase at the end of February, 7.5% more than one year ago. New-home inventory is plentiful and not moving particularly quickly, a positive sign for buyers. Though new-home inventory is increasing, existing homes are also piling up on the market and new builds are making up a smaller percentage of total inventory, 28.7% in February compared with 29.9% last year at this time.
More completed new homes are on the market than nonstarted ones
With months of supply remaining in buyer’s market ranges for new builds, we continue to see more completed homes for sale than ones that haven’t been started yet. The more leisurely pace of the market allows buyers to actually visit their potential new home in its finished state instead of being forced to make a purchase on a home that doesn’t exist yet, as many did during the post-pandemic buying craze of 2021 and 2022.
What does this mean for buyers and builders?
As mortgage rates remain stubbornly high and existing-home prices continue to climb, prospective homebuyers should seriously consider a new build. The market conditions are more favorable to buyers, builders are prioritizing delivering more affordable new inventory, and the cost of ownership for new homes tends to be lower than existing homes. There is a common misconception that newly built homes are too expensive for the typical buyer, but especially in the South, we see that this is not the case. This month’s new-home sales data should be interpreted as yet another sign to consider new construction.