March 25, 2025

New home sales rose 1.8% in February to 676 thousand after having fallen 6.9% in January.  In the past year new home sales have risen 5.1%.   New home sales can be volatile from month to month, but it seems clear that they appear to be in a gradual uptrend.

Mortgage rates are  now 6.8%.  As inflation subsides further in 2025 and the Fed cuts rates slightly, mortgage rates should decline to 6.2% by the end of this year.

Home prices fell 3.0% in February to $414,500 after having risen 2.5% in January.  They tend to be rather bouncy from from to month but over the past year new home prices have declined 1.5%%.

Housing affordability currently stands at about 100 which means that median-income earning consumers have almost exactly the amount of income required to purchase a median-priced home.  If mortgage rates continue to decline slowly in 2025 as inflation subsides, home prices are fairly steady, and income continues to climb, affordability should rise as the year progresses, and that median income earning family should have about 15% more income than required by the end of this year.  This should provide some stimulus for both new and existing home sales.

As a result, we look for new home sales to rise from 676 thousand currently to almost 800 thousand by the end  of 2025.

Stephen Slifer

NumberNomics

Charleston, SC