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Ammon News - Sales of new U.S. single-family homes unexpectedly fell in February after mortgage rates increased during the month, but the underlying trend remained strong amid a chronic shortage of previously owned houses on the market.

The report from the Commerce Department on Monday also showed the median new house price last month was the lowest in more than 2-1/2 years, while supply was the highest since November 2022. Builders are ramping up construction, while offering price cuts and other incentives as well as reducing floor size to make housing more affordable.

"Housing activity is stabilizing as homebuilders appear to be building cheaper, and therefore, likely smaller homes," said Conrad DeQuadros, senior economic advisor at Brean Capital. "Sales have been relatively stable at December's level over the last two months and prices have been falling at mid-single-digit rates on a year-over-year basis."

New home sales slipped 0.3% to a seasonally adjusted annual rate of 662,000 units last month, the Commerce Department's Census Bureau said. The sales pace for January was revised up to 664,000 units from the previously reported 661,000 units.

Economists polled by Reuters had forecast new home sales, which account for 13.1% of U.S. home sales, would rise to a rate of 675,000 units. New home sales are counted at the signing of a contract, making them a leading indicator of the housing market. They, however, can be volatile on a month-to-month basis. Sales advanced 5.9% on a year-on-year basis in February.

The new homes market has defied 525 basis points worth of interest rate hikes from the Federal Reserve since March 2022, bolstered by a dearth of previously owned houses for sale.

The government reported last week that housing completions hit their highest level in 17 years in February.

Reuters