The median price of new single-family homes sold in January in the United States has experienced a slight increase from the previous month, but remains 2.6% lower compared to the same period last year. Despite this decrease, the median price is currently back at the level seen in October 2021. This information comes from data released by the Census Bureau.

The three-month moving average, used to smooth out fluctuations, has shown minimal change and currently stands at $420,700, which is a 12.3% drop from its peak in December 2022. However, it is important to note that the reported price declines do not incorporate mortgage-rate buydowns and other incentives provided by homebuilders.

These contract prices demonstrate the shift towards more affordable price points by homebuilders, who are targeting smaller homes and fewer expensive amenities to remain competitive with existing homeowners. Notably, the largest homebuilders have acknowledged aggressive competition and narrowing price gaps between new and resale single-family homes.

Companies like D.R. Horton have highlighted the use of mortgage-rate buydowns to lower monthly payments on new homes, making them more attractive than equivalent resale properties. Sales of new homes have stayed relatively stable, with 57,000 units sold in January, up 3.6% from the previous year. In contrast, sales of existing homes have plummeted by 20% over the same period.

The strategy of offering houses at lower price points, coupled with mortgage-rate buydowns, has proven effective for homebuilders in maintaining sales volume. Despite this, inventory levels for new homes have remained high, currently standing at 456,000 units in January. This oversupply translates to an 8.0 months' supply based on current sales levels, indicating a surplus in the market.

The market dynamics between new and existing homes have shown a significant shift, with the median price of new homes being only 7.1% higher than existing homes. This trend, reminiscent of the early phases of the Housing Bust in 2005 and 2006, showcases the evolving competitiveness in the real estate sector.

While the market remains stable, experts caution against potential risks, as heightened competition and market fluctuations could impact the residential real estate landscape in the coming months.