New residential sales drastically fell this January, a stark reversal from the year-end momentum of 2025 as record winter storms caused contract signing to slow to a crawl.
It was the biggest monthly percentage decline since June 2013, when homebuilders were reeling in the wake of the Great Recession. This came as a shock to economists who predicted a more modest drop.
New home sales fell to a seasonally adjusted annual rate of 587,000 in January, a 17.6% decline from December 2025, the Census Bureau reported Thursday. The median sales price fell down to $400,500 while the average sale price dropped to $499,500 from $530,900 in the previous month. Single-family housing starts fell 2.8% to a 935,000 seasonally adjusted annual rate (SAAR) in January 2026, driven down by severe winter weather and ongoing affordability constraints.
While the initial report looks drastic, economists say one month’s drop cannot show the whole picture. This slowdown is being driven by a combination of cold weather and tariffs. Builders are feeling the impacts of tariffs. The snow and below freezing temperatures for most of the month in the South and Northeast significantly delayed construction. The supply chain is finally feeling the full impact of tariffs. High interest rates could also be a contributing factor, making it hard for people to afford homes. All of these factors could be behind the dramatic drop and the poor weather explains the report as a one-off.
“While there may be some weakening, it’s a little difficult to really conclude how much of this is demand-related or if it’s just kind of idiosyncratic features weighing on this month’s report”, said Matthew Walsh, an economist for Moody’s Analytics.
Walsh said that severe weather played a major role as well as continuing impacts to the supply chain due to tariffs.
“This really speaks to some of the challenges builders are facing on the supply side,” Walsh said. “Builders are still contending with higher prices from tariffs and stricter immigration policy that kind of exacerbate ongoing labor supply hurdles that builders have long contended with.”
Looking forward, this does not bode well for the spring housing season as the U.S.-Israeli war with Iran sends oil prices soaring, raising inflation risks and sending mortgage rates higher.
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.
Despite the drop in sales, the Midwest is showing a rise in demand from buyers, as people from the coasts rush in to relocate to the more affordable cities there. This shift in demand cannot keep pace with the current supply says Anamica Rai, a Chicago real estate agent.
Rai says listings are leased above asking price before a showing can be done, turning the Chicago rental market into something more often seen in New York or San Francisco. Rai herself was looking to buy in the next year as rent prices are rivalling mortgages.
“The supply is just not there,” she said. “A lot of people from across the country are moving to Chicago because even though the pricing is going up it still seems like it’s relatively lower than a lot of major cities. A lot of new buildings are being built but the rate of buildings being built and the influx of population are not growing at the same rate.”
While the national averages were causing concern for some, it was the regional shifts, especially in the South and West that were the most troubling and unexpected changes according to economists.
With snowstorms shutting down the Southern states for part of January, the reduced regional numbers make sense. However, the West did not have any significant event contributing to their poor sales numbers which indicates buyers’ lack of demand despite mortgage rates hovering on the lower side of average at 6.10%.
“There are some large regional differences and it’s particularly historic,” said Tobias Peter, co-director of the American Enterprise Institute Housing Center.
“The Northeast and the Midwest are generally appreciating and they are going pretty strong. But the Southern part of the country and the western part of the country, have been slowing down.”