Sales of newly built, single-family homes were 4.3% higher than in December and up 19% from January 2020, according to data from the US Department of Housing and Urban Development and the Census Bureau.

New home sales are now running at a seasonally adjusted annual rate of 923,000, up 4.3% month over month. Chuck Fowke, chairman of the National Association of Home Builders (NAHB), said that record low rates and the pandemic-driven suburban shift spurred the increase in sales in January. 

Regionally, new home sales rose in three regions, up 12.6% in the Midwest, 3% in the South and 6.8% in the West. The Northeast was the only region to post a decline, down 13.9% in January.

“However, rising affordability issues are looming this year, particularly increasing building material costs, including lumber, which is adding $24,000 to the price of a typical newly-built home,” Fowke said. “Builders also cite rising regulatory issues as a potential concern.”

Inventory remained low at a four months’ supply, with 307,000 new single-family homes for sale. This is 6.3% lower than a year ago. The median sales price, on the other hand, continues to increase, up 5.3% to $346,400 year over year.

“With existing home inventory at all-time lows, the demand for new construction remains strong,” NAHB Chief Economist Robert Dietz said. “Though, rising building and development costs, combined with recent increases in mortgage interest rates, threaten to exacerbate existing affordability conditions. Builders are exercising discipline to ensure home prices do not outpace buyer budgets.”