Following a sluggish start to the year, new home sales in the United States edged upward in February, offering signs of resilience in a housing market still adjusting to shifting economic winds. According to the California Association of Realtors (CAR), lower mortgage rates and continued builder incentives helped lure buyers back into the market.
Sales of new single-family homes rose 1.8% from January to a seasonally adjusted annual rate of 676,000 units, slightly under economists’ expectations. Still, the figure marked a 5.1% increase compared to the same time last year.
“Buyers appeared to respond to lower borrowing costs and price incentives offered by builders,” C.A.R. noted in its latest housing market update. The average 30-year fixed mortgage rate dropped by nearly 20 basis points during February, giving hesitant buyers more reason to return to the market.
Regionally, the story was mixed. The Midwest and South posted strong gains, up 20.6% and 6.6% respectively. The West, however, saw a 13.6% drop in new home sales, while the Northeast recorded a steep 21.4% decline.
As March unfolds, housing analysts at CAR are watching for additional momentum, especially as the market approaches the critical spring buying season. But looming economic uncertainties could create headwinds.
Among the concerns is inflation.
The Federal Reserve’s preferred gauge, the personal consumption expenditures (PCE) price index, rose 0.4% in February and 2.5% from a year earlier, the U.S. Department of Commerce reported. Core PCE, which excludes food and energy, saw its largest monthly increase since January 2024, climbing 0.4% month-over-month and 2.8% annually—slightly higher than expected.
“While the uptick in inflation wasn’t a complete surprise, it does suggest the Fed may delay interest rate cuts longer than previously anticipated,” CAR economists observed. Weakened consumer spending—up just 0.1% in February—also signals a possible shift in household behavior amid economic uncertainty.
Labor market data, however, continues to show stability. Initial jobless claims for the week ending March 22 dipped to 224,000, according to the Department of Labor. Despite layoffs ordered by the Department of Government Efficiency (DOGE), unemployment claims by federal workers declined week-over-week, though filings in the D.C. area have trended higher. C.A.R. expects these layoffs to show more clearly in the upcoming March jobs report.
Mortgage rates, meanwhile, have remained mostly flat in March after falling to a three-month low early in the month. Rate movements have closely mirrored stock market volatility as investors digest recent trade policy announcements and inflation data.
CAR also noted an uptick in seller sentiment. According to the National Association of Realtors’ Confidence Index, 29% of respondents anticipate increased seller activity in the next three months—a slight rise from January and a year ago. Buyer sentiment, however, remained flat.
Still, more listings and more first-time buyers entering the market—31% in February, up from 28% in January—have created a less competitive environment overall. Homes received an average of 2.3 offers in February, compared to 2.6 a month earlier.
“With rates expected to fluctuate in the short term, the spring housing market could hinge on how buyers and sellers react to broader economic signals,” the CAR report said.
