Slight Decline in Rates Helps New Home Sales to Edge Higher in February

A slight decline in mortgage rates and limited existing inventory helped new home sales to edge higher in February even as housing affordability challenges continue to act as a strong headwind on the market.

Sales of newly built, single-family homes in February increased 1.8% to a 676,000 seasonally adjusted annual rate from a revised January number, according to newly released data from the U.S. Department of Housing and Urban Development and the U.S. Census Bureau. The pace of new home sales in February was up 5.1% compared to a year earlier.

New home sales have been roughly flat thus far in 2025, as ongoing limited inventory of existing homes in many markets continues to support the need for new homes. Lower mortgage rates helped to lift demand in February, despite other near-term risks such as tariff issues and affordability concerns.

A new home sale occurs when a sales contract is signed, or a deposit is accepted. The home can be in any stage of construction: not yet started, under construction or completed. In addition to adjusting for seasonal effects, the February reading of 676,000 units is the number of homes that would sell if this pace continued for the next 12 months.

New single-family home inventory in February continued to rise to a level of 500,000, up 7.5% compared to a year earlier. This represents an 8.9 months’ supply at the current building pace. The count of completed, ready-to-occupy homes available for sale increased again, rising to 119,000, up 35% from a year ago and marking the highest count since mid-2009. 

However, after accounting for a low 3.4 months’ supply for the existing single-family market, total market inventory (new and existing homes) stands at a lean 4.2 months’ supply per NAHB estimates. A balanced market is typically defined as a 6 month’s supply.

The median new home sale price in February was $414,500, down 1.5% from a year ago. The count of sales was supported by a gain of transactions priced between $300,000 and $400,000 in February.

Regionally, on a year-to-date basis, new home sales are up 12.4% in the South but down 6.7% in the West, 13.5% in the Midwest and 50.8% in the Northeast.