New Home Sales: Stronger On Big Discounts

Bottom Line:   New home sales in January were slightly better than expected, as builders discounted homes sharply. Average and median prices fell 8 to 13% on the month. Anecdotal evidence suggests homebuilders have been offering discounts and buying down the mortgage rate for homebuyers, especially in the new "3-2-1" and "2-1" buydown structures. Sales for December were revised higher, but there were downward revisions to October and November data that more than offset that. The new home market remains modestly oversupplied, but demand is there at lower prices. Affordability remains an issue for most segments of the market. Months' supply dropped to just under eight months from over ten last year, so the market is slowly rebalancing. Residential investment will likely remain a drag on growth in the 1st Half of 2023, but its negative impact should be more muted.