New-Home Sales Plunge Unexpectedly in January in Biggest Drop in 13 Years

Contract signings for newly built homes dropped sharply in January, in a troubling sign for homebuilders and the spring housing market.

Sales of new single-family homes were at a seasonally adjusted annual rate of 587,000 in January, down 17.6% from December and 11.3% lower than a year earlier, the U.S. Census Bureau and Department of Housing and Urban Development reported Thursday.

It marked the biggest monthly percentage decline since June 2013, when homebuilders were reeling in the the wake of the Great Recession. The plunge in sales came as a surprise to economists, who had forecast a modest 3.5% decline from the December sales figure.

Perplexingly, the sharp drop in sales came during a period when mortgage rates hovered near three-year lows. The 30-year fixed rate averaged 6.10% in January, lower than last week's average of 6.11%, according to Freddie Mac.

New home prices fell as well, with the median sales price of new houses sold in January at $400,500, down 4.5% from December and 6.8% below year-ago prices.

"All told, this is a very disappointing result for new-home sales," says Realtor.com® Senior Economist Joel Berner. "Things had been shaping up nicely for buyers, with plenty of supply in the new home market and mortgage rates falling, but buyers seem to be spooked."

Berner says that some buyers may have been waiting for mortgage rates to fall further, not realizing how dramatically rates would rebound this spring.

"Others may be feeling some generalized economic anxiety, unsure of the future of their jobs and savings accounts, and unwilling to make a major purchase," he adds.

The January new-home data, delayed due to federal funding lapses, shows a similar trend to sales of existing homes, which fell 8.4% monthly and 4.4% annually in January. New-home sales are measured by contract signings, while sales of previously owned homes are recorded at closing.

"Like existing home sales activity, which has had a slow start to 2026, the new home market has been constrained by affordability challenges, economic uncertainty, and, in some parts of the country, unseasonably cold winter weather," says BrightMLS Chief Economist Lisa Sturtevant.

Severe winter weather did impact the eastern U.S. in the final week of January, potentially delaying some sales. However, January 2026 was the 11th-driest on record since 1895 nationally, according to federal records, and was an unusually warm month in the West.

On a monthly basis, new-home sales dropped sharply in every region in January, falling 45% in the Northeast, 34% in the Midwest, 22% in the West, and 8.1% in the South.

"The weak performance in the South can be at least partly attributed to the winter storm, which shut down entire Southern states for part of January," says Berner. "The poor sales performance out West is harder to justify, but it sheds light on the decisions of builders to pull back on new construction activity in the region. The West seems to be facing a serious lack of demand for homes."

Meanwhile, new headwinds are forming for the crucial spring housing season, as the U.S.-Israeli war with Iran sends oil prices soaring, raising inflation risks and sending mortgage rates higher.

Mortgage rates, which dipped below 6% in late February, have marched higher since the war began, eroding the affordability gains that buyers seemed poised to enjoy this year.

"There is still significant pent-up demand in the market, but many prospective home buyers are holding back as the job market weakens, oil prices surge and mortgage rates retreat from their sub-6% levels," says Sturtevant. "It is going to be a slow start to the spring homebuying season, and new homebuilders will probably see less traffic this spring than they did a year ago."