New Home Sales Post Double-Digit January Gains

Sales of new homes increased by more than 15 percent between December and January, returning the rate to levels not seen since mid-2008, when the market was sliding into recession. Despite ongoing improvements, the sales pace remains about 40 percent below healthy market levels.

New home sales rose 15.6 percent in January to a seasonally adjusted annual rate of 437,000, the fastest since June 2008, according to a February 26 Commerce Department report. The figure is 28.9 percent above the January 2012 level.

December's sales were also revised higher, to 378,000 from 369,000. Despite the uptick, sales are still behind the 700,000-unit annual pace considered healthy.

"Today's report shows a strong revival in new-home sales across all regions of the country and bodes well for the upcoming spring buying season," said David Crowe, chief economist for the National Association of Home Builders (NAHB).

Sales posted solid gains across every region in January "?u a 45.3 percent gain in the West, a 27.6 percent increase in the Northeast, an 11.1 percent gain in the Midwest and a 3.2 percent gain in the South.

"That said, the razor-thin supply of new homes for sale is very concerning at a time when we are only about halfway back to what could be considered a 'normal' level of activity," Crowe added. "Builders need to be able to refresh their inventories to keep the momentum going."

At the current sales pace, housing inventory would sell out in 4.1 months, the smallest supply in eight years. There were 150,000 new homes for sale at the end of last month, only slightly above the rock-bottom level of 143,000. A healthy market typically supports six to seven months of inventory, and a slowing in foreclosure filings is keeping additional homes from reaching the market.

The median sales price of new houses sold in January was $226,400.

"While we can't expect to see double-digit sales growth every month, consumers are definitely coming off the fence as prices start to rise, and builders in some cases are having a tough time keeping up," said Rick Judson, NAHB chairman.