Economists had estimated that new home sales rose 3.2% at an annual rate of 510,000.
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On the other hand, new home sales in the South slid 4.1%, and sales in the Midwest and Northeast tumbled 17.9% and 24.2%, respectively. A rebound in Western home sales fueled the increase.
The median price of a new home was $301,400, up from $283,900 in January. The National Association of Realtors, an industry group which reports on sales of existing homes, recently called for more construction to ease supply constraints throughout the market. The index had been in the low 60s for eight months until February.
Shares in D.R. Horton Inc, the largest US homebuilder, fell 1.4 percent and rival Lennar Corp slipped 0.8 percent. The index, however, increased 25 percent from a year ago.
But the dearth of homes for sale, which is limiting options for buyers and pushing up prices, is a major challenge for the sector.
In the late 1990s, new-home sales consistently reached a pace of 300,000, and during the 2000s boom they soared to above 550,000.
“Spring sales should be decent, but won’t be as good as they could have been if there was more inventory on the market and affordability was a little bit stronger”. February’s rate was 6.1% below the pace in February 2015.
The limited supply of houses have pushed up prices and curbed sales.
February’s muted completions help explain the month’s soft new home sales, while the disappointing number of new building permits issued also suggests there won’t be many new homes opening up on the market anytime soon. Purchases of existing homes tumbled in February, with the prior two months of healthy sales likely straining already tight supplies.
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“Job growth is solid, income growth is starting to pick up, mortgage rates are still fantastic low and underlying demographics are pretty positive for housing”, said David Berson, chief economist at Nationwide Insurance in Columbus, Ohio. The economic recovery has been choppy, with grudgingly slow wage growth holding back homeownership.
