Prices are surging and uncertainty in the availability of building materials, lots, labor is chipping away at new-home sales, even as buyer demand remains high.
Newly built, single-family home sales fell nearly 6% in May—the lowest pace in a year, the Department of Housing and Urban Development and U.S. Census Bureau reported Wednesday. A new home sale is reflected in the survey when a sales contract is signed or a deposit is accepted.
New-home prices jumped 18% year-over-year in May as pricing and availability woes continue over building materials.
“New home prices have increased over the last year due to higher material costs and delays for deliveries,” says Chuck Fowke, chairman of the National Association of Home Builders. “Policymakers must take action to improve supply chains in order to protect housing affordability. While lumber costs have come down in recent weeks, they are still more than 210% higher than a year ago. And [oriented strand board] prices are up 380% over the last year.”
About 20% of builders have limited sales activity in recent months to help manage material supply chains and labor availability, according to the builder’s association.
Builders are trying to catch up: The number of new homes that are sold but have not started construction is up 76% over last year.
Inventories in the new-home sector remain tight. There are 330,000 new single-family homes for sale, nearly 4% lower than a year ago. The median sales price of a new single-family home in May was $374,400—18% higher than the median sales price of $317,100 from a year earlier.
“Entry-level buyers are being most affected by higher prices,” says Robert Dietz, chief economist at the National Association of Home Builders. “Just a year ago, shares of sales priced below $300,000 accounted for 44% of sales, while this May it has dropped to 26%.”
Here’s how existing-home sales fared last month, according to the National Association of REALTORS®’ latest report: Hope for Greater Inventory as Home Sales Slip Again.