Rising Lumber Costs, Low Inventory Depress U.S. New Home Sales; Fuel Significant Price Increases
Real Estate In-Depth | May 26, 2021
WASHINGTON—Rising building materials costs and low inventory have caused new home sales prices to jump 20% on a year-over-year basis, harming housing affordability and driving down the pace of new home sales, the National Association of Home Builders reported on May 25.
Sales of newly built, single-family homes fell 5.9% in April, following a significant downward revision of the March estimate, to an 863,000 seasonally adjusted annual rate, according to newly released data by the U.S. Department of Housing and Urban Development and the U.S. Census Bureau.
The median sales price was $372,400, up from the $310,100 median sales price posted a year earlier.
“Affordability factors are clearly affecting new home sales,” said NAHB Chairman Chuck Fowke. “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. Policymakers need 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.”
“After a period of builders holding back price increases, new home prices were 20% higher year-over-year per the April Census data,” said NAHB Chief Economist Robert Dietz. “Higher prices 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% of new home sales were priced below $300,000.”
In addition to adjusting for seasonal effects, the April reading of 863,000 units is the number of homes that would sell if this pace continued for the next 12 months.
Inventory remains low at a 4.4-month supply, with 316,000 new single-family homes for sale, 33.3% lower than April 2020. Completed homes continue to fall as a share of the market, representing only about 11% of the inventory in April, compared to 24% a year ago.