New-Home Sales Drop Sharply as Prices for New Builds Jump to a 3-Year High

Sales of newly built homes slumped dramatically in January, in another troubling sign for a housing market searching for signs of life in 2025.

Signed contracts for new single-family homes plunged 10.5% last month from December, to a seasonally adjusted annual pace of 657,000, the U.S. Census Bureau reported on Wednesday. The January sales figure was down 1.1% from a year earlier.

The median sales price of new houses sold in January was $446,300, up 3.7% from a year earlier. Last month’s typical sales price was the highest for any January on record, and the the highest of any month since October 2022, when an all-time high was reached.

Despite the sharp increase in new-home sales prices, median list prices for new construction are declining annually, as builders offer more homes with smaller floor plans, Realtor.com® data shows.

The divergence suggests that higher-end, more expensive new homes are selling faster, while smaller, more affordable builds are struggling to find qualified buyers.

Realtor.com senior economist Joel Berner notes that new homes in the $300,000 to $399,999 price range saw the biggest drop-off in sales last month, declining to 13% of all new-home sales in January from 16% in December.

“Much of this sales share was taken over by the $500,000 to $599,000 segment, which grew from 7% to 9% over the past month and pulled the median sales price further upmarket,” says Berner.

The slump in new-home sales follows data showing that January was also a disappointing month for closed sales of previously owned homes, which dropped 4.9% from December.

Although both new- and existing-sales figures are seasonally adjusted, unusually brutal weather in January might have played a role, after a series of winter storms slammed much of the country.

“The large fall in new-home sales in January was to be expected given the disruption from the unseasonably severe winter weather,” says Bradley Saunders, North America economist for Capital Economics.

“Indeed, the breakdown shows sales declined in all regions except the West, where the weather was relatively mild,” he adds. “While sales should rebound this month, elevated mortgage rates will limit the upside for buying activity this year.”

Mortgage rates do remain the housing market’s main villain, with the average rate on 30-year fixed home loans hovering above 6.8% since mid-December.

For homebuyers who had hoped the new year and new presidential administration would bring lower rates, so far there have been few signs of relief.

In a troubling development for homebuyers, mortgage giant Fannie Mae recently revised its 2025 forecast, projecting mortgage rates will average 6.8% across the year, dropping to 6.6% by year-end.

New-home sales drop everywhere but the West

Supporting the theory that severe winter storms depressed sales in January, every region saw declining monthly sales except the West, where new-home sales rose 7.7% from December.

The Northeast saw the sharpest decline, with sales of newly built homes dropping 20% in January from the prior month. Sales also declined 16.7% in the Midwest and 14.8% in the South.

Policy uncertainty remains a major overhang for the residential construction industry, as homebuilders wait to see how President Donald Trump‘s tariff agenda could affect the cost of imported building materials.

On the other hand, homebuilders are hopeful that Trump will follow through on his vows to cut construction regulations and extend tax cuts, moves that could reduce the cost of building homes.

“Home builders and remodelers are dealing with positive and negative risks in the months ahead,” says
Rob Dietz, chief economist of the National Association of Home Builders.

The NAHB on Tuesday projected that the number of new homes built in 2025 would remain virtually unchanged from last year, at 1.01 million.

That would mark an anemic pace of growth and is likely not enough to adequately address the nation’s housing shortage, which Freddie Mac recently estimated at a shortfall of 3.7 million units.

Still, industry observers expect new construction to continue to play a major role in the housing market this year, as new builds help fill the supply shortfall of existing homes.

“Though January 2025 was a more challenging month for new-home shoppers and sellers than the last few months of 2024, the newly built segment is still an especially attractive one compared to the existing home segment,” says Berner.

“Homes are easier to shop for with more months of supply on the market, prices remain competitive with the resale market, and purchasing a new build offers more customizability and a lower cost of ownership than existing homes,” he adds.