Existing Home Sales provide the number of purchases made for homes, condominiums, and co-ops that have already been built, while New Home Sales represent the number of brand-new houses that were purchased or committed to being purchased over the course of a month. Both new and existing home sales give an indication of the demand for housing. When people purchase a home, they buy goods to fill their homes with, lifting other sectors simultaneously. New home sales are also more impactful to GDP than existing home sales since the entire sale value is included instead of only the real estate commission being included for an existing home during the sale. While home resales may not generate new construction jobs as housing starts do, they have a similar effect on consumer spending as people purchase items for their new home.
In February, sales of newly-built homes fell by 18.25% to 775,000, while sales of existing homes declined by 6.61% to 6.2 million. Housing inventory remained virtually unchanged from the previous month and currently sits at 1.03 million. The median sales price of a new home decreased by 1.1% to $349,400, while the median price of an existing home increased by 1.89% to $344,200.
New home sales declined in all four census regions, falling by 37.5% in the Midwest, 16.4% in the West, 14.7% in the South, and 11.6% in the Northeast. Existing home sales followed a similar pattern, with sales declining by 5.4% in the South, 15.3% in the Midwest, and 12.3% in the Northeast. However, sales increased by 5.2% in the West—the only region that reported a gain from the previous month.
Home sales declined last month partly due to severe winter weather which prevented potential buyers from going out to look at houses. Mortgage rates are beginning to rise, which could also dissuade some potential home buyers. Home prices continue to raise as builders face inflationary pressure on materials and labor costs and as housing inventories remain restricted. The median price of a new home is 5.3% higher than it was a year ago, while the price of an existing home has surged by 12.6% over the same period. Even with higher prices and rising rates, housing demand will likely remain strong in the near future as many millennials reach their peak earning years and begin to settle down.
March 23, 2021