New home sales plunge

March 19, 2026

New home sales plunged 17.6% in January after December sales were revised lower. Sales hit 587,000 units, the lowest level since October 2022, in the wake of a searing bout of inflation and the Federal Reserve’s responding rate hikes. Sales are captured at the contract signing. Unusually harsh winter weather, which limited foot traffic, was another hurdle. All regions experienced a significant deterioration in sales.

The median sales price ticked lower to just above $400,000. Builders continued to offer incentives, including price cuts, in an effort to clear the backlog of inventories. According to the National Association of Home Builders, about 40% of builders cut prices in January. That marks the third consecutive month with price cuts by so many. Some 65% of builders are offering some type of incentive, making it the 10th consecutive month that share was above 60%.

Separately, existing home sales, which are recorded at the contract closing and reflect activity that is lagged by a few months, dropped 8.4% in January. Sales hit 3.9 million, the lowest since August 2024, but have since been revised higher to 4 million. The supply of homes available for sale ticked down 0.8% from December, limiting options for buyers currently on the market and increasing the median sales price to a new January high of $396,800. The good news is that sales rebounded in February in all regions except the Northeast; inventory increased in the month.

Mortgage rates hovered around 6.1% in January before falling to a low of 5.98% in late February. This will show up as a boost to sales activity for new home sales, but the momentum could be short-lived. Rising mortgage rates at the start of March, coupled with surging gasoline prices due to the war in the Middle East are weighing on consumers.