Sales of new homes fell in February to a nine-month low as severe winter weather in parts of the U.S. limited foot traffic at a time when the market features elevated prices and a lack of supply.
Purchases of new single-family homes decreased 18.2% -- the sharpest decline since July 2013 -- to a seasonally adjusted annual rate of 775,000 last month, the Commerce Department reported Tuesday.
For February, sales fell in every part of the country, led by a 37.5% drop in the Midwest and a 16.4% fall in the West. Sales declined 14.7% in the South and were down 11.6% in the Northeast.
The median price of a new home sold in February was $349,400, up 5.3% from a year before.
In February, inclement weather impeded the search for homes, with temperatures dropping below freezing in some parts of the country and with power disruptions hitting states including Texas.
The weather disruption was also evident in the market for existing homes, for which the U.S. released data Monday. Those sales declined 6.5% last month.
Housing sales are also being restrained by a limited number of available properties at the same time prices remain elevated.
Tuesday's report showed that the number of sold properties for which construction hadn't yet started fell to 211,000, the lowest since October 2018. The winter storms are seen as likely to have slowed construction.
The report Tuesday marked the first decline in sales of new homes in two months. Housing continues to be one of the few bright spots during the coronavirus pandemic. New-home sales last year advanced to levels not seen since the housing boom of the mid-2000s.
High lumber costs, rising mortgage rates -- though they remain near record lows -- and the dearth of properties available for sale are pushing homeownership out of range for many. But despite the hiccup, economists don't believe that even skyrocketing prices will cool the U.S. housing market.
The pace of new-home sales remained 8.2% on a seasonally adjusted basis above the same month last year, pointing to the housing market's strength through the pandemic.
"Home sales are still higher than a year earlier, and given the increased pace of building, new-home sales should boom again this spring," said Robert Frick, corporate economist at Navy Federal Credit Union.
In the coming months, higher borrowing costs could put more pressure on affordability and keep some buyers out of the market. Mortgage rates have been slowly rising since mid-February as the U.S. economic outlook improves.
"A combination of rising interest rates, covid fears and tighter lending standards is depressing demand," Ian Shepherdson, chief economist at Pantheon Macroeconomics, said in a note.
At the current sales pace, it would take 4.8 months to exhaust the supply of new homes, compared with 3.8 months in January.
New-home purchases account for about 10% of the market and are calculated when contracts are signed. They are considered a timelier barometer than purchases of previously owned homes, which are calculated when contracts close. The figures tend to be volatile.
Information for this article was contributed by Olivia Rockeman of Bloomberg News (WPNS) and by Martin Crutsinger of The Associated Press.