The market for new homes felt a chill in January

Back in December, housing analysts were predicting that by now, the market for homes would be gradually improving after last year's doldrums.

On Thursday morning, we got an early test of those predictions when the Census Bureau reported January's new home sales, and the news was not good.

Seasonally adjusted sales were down more than 17% compared to December. On one hand, Lisa Sturtevant of Bright MLS expected some weakness. 

“There was a lot of wintry weather. People aren't usually out touring home sites during that weather,” Sturtevant said.

But she didn’t think the numbers would be quite this bad.

“We saw sales at their lowest level since October 2022,” she said.

That has caused some home builders, and the lenders they work with, to offer sweeteners like below-market mortgage rates to prospective buyers, said Tiffany Russell, a real estate agent in Austin, Texas.

“I'm seeing that they are building a lot of homes and giving the farm away on incentives,” Russell said.

For sellers, Russell is also being more conservative with asking price these days.

“We are pricing on the lower end of the comps of the area, because our buyers won't come through the door if we're even a bit overpriced,” she said.

Rising mortgage rates in the past few weeks haven’t helped, said Michael Orbino, a real estate agent in Bellevue, Washington. 

“The spike in interest rates with conflict going on in the Middle East and oil prices have really disappointed some folks,” Orbino said.

That, plus ongoing worries about the job market, means the housing market is still kinda stuck.

“We've been at this for three years ever since the Fed changed their policy,” Orbino said.

He said at this point, he considers the slower housing market a new normal.