New home sales in the U.S. dropped more than expected in January, the Census Bureau reported Thursday.
Some 607,000 new homes were sold during the month on a seasonally adjusted basis, down from a revised 652,000 sales in December, according to the report, which had been delayed due to the recent U.S. government shutdown.
The drop was steeper than projected by economists, who had estimated January sales at 620,000, based on a survey by the data provider FactSet.
The median sales price was little changed at $317,200, but was down 3.8% from a year earlier, the report showed.
Economists cautioned that the home-sales reports are subject to a wide margin of error, and that the housing market still appears to be recovering from a low reached last October, when category-4 Hurricane Michael slammed into the Gulf of Mexico coast of northern Florida.
The number of new homes for sale, currently at 336,000, rose about 14% from last year, the latest report showed.
The inventory increase has suppressed sales prices and is likely to coax more buyers into closings in coming months, according to Ian Shepherdson, chief economist at the forecasting firm Pantheon Macroeconomics. Another factor likely to bolster sales is a recent drop of more than half a percentage point in average mortgage rates, making borrowers' monthly payments more affordable.
According to the federally backed mortgage-finance company Freddie Mac, the average fixed interest rate on a 30-year home loan has declined to about 4.3%, the lowest in a year. As recently as November, the rate had climbed as high at 4.94%.
"Sales are likely to rise further over the next few months, perhaps breaching the 700,000 mark and hitting new cycle highs," Shepherdson wrote in a report. "We think talk of a housing downturn is mistaken."