Rising home prices, material costs and a labor shortage have taken their toll, builders say, and more potential new-home buyers have been priced out of the market.
WASHINGTON – Rising building material costs and low inventory caused new-home sales prices to jump 20% year-to-year, according to the National Association of Home Builders (NAHB). And that has hurt housing affordability and driven down the pace of new home sales.
According to the U.S. Census Bureau and Department of Housing and Urban Development (HUD), sales of newly built, single-family homes fell 5.9% in April (863,000 seasonally adjusted annual rate), following a significant downward revision of the March estimate.
“Affordability factors are clearly affecting new home sales,” says Chuck Fowke, chairman of the National Association of Home Builders (NAHB) and a custom home builder from Tampa. “A growing number of builders are limiting sales in order to manage supply chains, including access and cost factors associated with lumber, appliances and other building materials.”
Fowke again called on policymakers “to find ways to improve the supply-chain by facilitating more domestic production, or in cases where that cannot be done, suspending tariffs to allow for more imports.”
A new home sale occurs when a sales contract is signed or a deposit accepted. At that time, the home can be in any stage of construction – not yet started, under construction or completed. In addition to adjusting for seasonal effects, the April reading of 863,000 units is the number of homes that would sell if that month’s pace continued for the next 12 months.
“After a period of builders holding back price increases, new home prices were 20% higher year-over-year per the April Census data,” says NAHB Chief Economist Robert Dietz. “Higher costs have priced out buyers, particularly at the lower end of the market. A year ago, 45% of new home sales were priced below $300,000. In April 2021, only 27% … were priced below $300,000.”
The median April sales price was $372,400, up from the $310,100 median sales price posted a year earlier. Inventory also remains low at a 4.4-month supply. There were 316,000 new single-family homes for sale – 33.3% lower than April 2020.
Completed homes also continue to fall as a share of the market, representing only about 11 percent of the inventory in April compared to 24 percent a year ago.
Regionally, new home sales rose in all four regions year-to-year, up 50.7% in the Northeast, 45.7% in the Midwest, 45.5% in the South, and 3.6% in the West.
However, those seemingly notable sales increases are due, in part, to the pandemic that started to take hold in April 2020. It’s not that April 2021 sales were so high, so much as April 2020 sales were so low.
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