New home sales began on a weak note in 2026 with a decline in sales caused by the cold snap across the country that kept millions indoors.
Seasonally adjusted sales totalled 587,000 in January, which is 11.3% below last year, the US Census Bureau reported Friday.
The size of the decline took economists by surprise and with mortgage rates moving above 6%, the prospects of a rebound in sales are now in doubt.
In 2025, many new homes sat on the market unsold which made buyers not want to build this year. New permits declined and heads are turning towards the resale market.
“We had a lot of units under construction last year that were coming on the market at a time where affordability was strained and demand was somewhat sluggish,” said Orphe Divounguy, a Senior Economist on Zillow’s Economic Research team.
The median sales price of new houses sold in January was $400,500, which is 6.8% below the January 2025 rate. February saw a dip in the mortgage rate helped improve buying power by about $30,000 for a median-income household over the past year, according to a Zillow report. But mortgage rates bumped up in March to 6%, which could threaten the typically robust spring market.
Buyers have become more sensitive to the sticker price as they navigate an affordability crisis.
“If mortgage rates continue their March high, everything is at risk because people are really sensitive to the affordability levels,” said Mike Simonsen, chief economist at Compass.
New privately-owned housing units under construction were 1,376,000 which is 5.8% lower than last year. Since 2023, this number has been declining, which could squeeze inventory in the next year and cause a flip to a sellers market.
“Under construction looks like a deep recession,” said Simonsen.
But the story is different across states, where some, like Arizona, have more housing supply due to builder-friendly policies since 2010. In smaller states like Connecticut, where the majority of homes on the market are in existing inventory, there is less demand for new homes. A tight supply also keeps prices soaring and locks 30 somethings out of the market.
It is why programs exist to lower the cost of signing a mortgage. Chelsea Osei, Program and Data Specialist for the Connecticut Housing Finance Authority, says that her organization has helped many 30 somethings afford a home through mortgage rate buydowns and decrease interest rates through working with lenders. Almost 50% of their clients are from BIPOC communities.
In February 2026, there were 7,170 homes for sale in Connecticut, down 11.3% year over year, according to Redfin. The under construction trend started in the state much earlier than the 2008 recession with fewer and fewer permits over time. Osei sees the struggle in her daily work with clients who find prices high in the urban centers, and homes non-existent in the suburbs.
“You would think that if you go to a more rural area it would be more affordable, but that is not true because the housing stock is even more limited,” said Osei.