US new home sales rebound unexpectedly in January

New home selling activity in the US picked up at the start of 2023, but some economists believed the burst of activity would prove short-lived.

According to the US Department of Commerce, in seasonally adjusted terms new home sales jumped by 7.2% month-on-month to reach an annual rate of 670,000 (consensus: 620,000).

That was on top of an upwards revision to December's reading from 616,000 to 625,000.

Yet sales slowed in all regions of the country, save in the South, where the annual pace of sales increased by 17.1% over the month.

The supply of new homes available for sale meanwhile slipped from 8.7 months' worth to 7.9.

Home prices also fell and sharply so with the median sales price down from $465,600 at the end of 2022 to $427,500 - the lowest level since February 2022 - and the average sales price retreating from $544,200 to $474,400, the least since June 2022.

In any case, according to Ian Shepherdson, chief economist at Pantheon Macroeconomics, the rebound in new home sales was a function of the dearth of existing home supply or a "compositional" shift in demand.

"[...] Total home sales have continued to move closely in line with mortgage demand, which is on course to fall sharply in February in the wake of the recent rise in mortgage rates.

"That points to a renewed fall in total home sales over the next couple months, driven primarily by lower existing home sales."